Internet investor: Venture into tax-free trusts

The proposed limit of pounds 50,000 that can be held in an Individual Savings Account (ISA) will have an immediate impact on anybody who has invested more than this in personal equity plans (PEPs) and tax-exempt special savings accounts (Tessas). It has been suggested that a one- off transfer of a greater sum into an ISA may be allowed. It is also possible that the investment limit may be raised, either as a result of the consultation process or in the future, perhaps by a figure linked to inflation each year.

However, the existence of a overall investment limit, whatever it is, where none existed before on PEPs means we should take a second look at alternatives that generate tax-free income and capital gains.

Venture Capital Trusts (VCTs) were introduced in the 1995 Finance Act. Investors are exempt from all income tax on dividends received from VCTs and from all capital gains tax on the disposal of VCT shares in a similar way to holdings in a PEP.

In addition, subscribers for new ordinary shares in VCTs are entitled to claim income-tax relief at the lower rate of income tax - currently 20 per cent - in the year the shares are issued, provided they are held for at least five years. Subscribers for new ordinary shares in VCTs are also able to defer a capital gain, up to the amount subscribed. The maximum you can invest in a VCT in one tax year is pounds 100,000.

By the nature of the beast, VCTs are going to be riskier investments than PEPs and Tessas have been and the ISA will be. Nevertheless, anyone likely to run up against the ISA investment limit in the very near future should perhaps be prepared to take more of a risk with other investments.

Where to start? Well, the British Venture Capital Association (BVCA) website calls itself the most comprehensive source of information on the UK venture capital industry on the internet. It probably is. The BVCA is dedicated to promoting the venture capital industry in the UK and its site lists VCTs and contact details for their fund managers.

Venture Capital UK is a new website, due to go live on 16 February. It is flagging itself as a one-stop source for information on venture capital in the UK. It intends to include information on all venture capital funds, business angels, start-up finance and equity finance.

You can also browse through the prospectus of Foresight Technology. The VCT broke new ground in offering warrants alongside ordinary shares and in publishing its prospectus on the internet. Unfortunately, the offer closed in November, after raising pounds 10m. The site has not been updated since, which is a pity, given the VCT's aims of investing primarily in companies involved in computer software and hardware, smart cards and the internet.

However, there are a number of VCTs in the pipeline, Quester VCT 2 is open for subscription now, Murray VCT 3 launches in February and the Oxford Technology VCT is planned for March. Others have yet to announce launch dates. Of the three fund managers which have confirmed timetables, only Murray Johnstone has a significant presence on the web. The firm has also its own generic guide - A Murray Johnstone Guide to Venture Capital Trusts - to assist anyone who may be interested in investing in a venture capital trust.

British Venture Capital Assoc:

www.brainstorm.co.uk/bvca

Venture Capital Network:

www.venturecapital.co.uk

Foresight Technology VCT:

www.foresightvct.co.uk

Murray Johnstone:

www.murrayj.com

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower