Clampdown on aggressive tax schemes should boost VCT demand

Bestinvest survey finds two-thirds of VCT groups expect fund raising in 2014/15 to be higher than previous year

A survey of VCT management groups by Bestinvest has found that 67% expect fund raising this year to surpass the £393 million raised in VCT new offers in the 2013/14 tax year, despite the fact the previous tax year saw a multi-year record for new fund raising. Among groups who responded to the Bestinvest survey, representing most VCT managers, all but one stated it was “highly likely” they will conduct additional fund raising this tax year.

Commenting on the findings, Jason Hollands, Managing Director of Bestinvest, said: “After a strong period for fund raising in 2013/14, views are generally quite bullish about the current tax year, though ultimately we believe that much will depend on what level of new cash the bigger players decide to go for, bearing in mind the significant scale of last year’s fund raising activity.

“VCTs are incredibly mindful of the need not to raise more cash that they are comfortable they are able to invest, as the rules require at least 70% of their portfolios must be invested in qualifying investments within three years to avoid jeopardising their VCT status. Generally upbeat forecasts on the size of the market suggest new deal pipelines remain strong as small enterprises seek development capital.

“From the perspective of investor demand, we see the VCT market as underpinned by the hunt for income and the reduced annual and lifetime pension allowances which came into effect this year impacting more affluent investors. Yields on mature VCTs are very high compared to most other asset classes, and importantly they are tax free which makes them potentially very attractive for higher and additional rate taxpayers who understand the risks of investing in less liquid investments.

“With HMRC continuing to show its determination to crack down on aggressive tax mitigation strategies, with expectations that it will today publish a list of 1,200 schemes whose members will be told to repay tax within 90 days, we expect that VCTs as a legitimate, government backed tax efficient investment scheme will be a beneficiary as investors shun dubious, loophole driven schemes.”

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Important information:

VCTs should be regarded as higher risk investments. They are only suitable for UK resident taxpayers who can tolerate higher risk and have a time horizon of greater than five years. Past performance is not an indication of future performance. Share values and income from them may go down as well as up and you may not get back the amount originally invested. Owing to the nature of their underlying assets, VCT's are highly illiquid. Investors should be aware that they may have difficulty, or be unable to realise their shares at levels close to that that reflect the value of the underlying assets. Tax levels and reliefs may change and the availability of tax reliefs will depend on individual circumstances. You should only subscribe for new VCT shares on the basis of the relevant prospectus and must carefully consider the risk warnings contained in that prospectus.

Press contacts:

Jason Hollands
0207 189 9919
07768 661 382
Jason.hollands@bestinvest.co.uk

Roisin Hynes
020 7189 2403
07966 843 699
Roisin.hynes@bestinvest.co.uk

About Bestinvest:

Founded in 1986, Bestinvest has grown to become a leading private client investment adviser, looking after £5 billion of assets. We offer a range of investment services from the Online Investment Service for self-directed investors to Investment Advisory and Investment Management services for clients who do not have the time or inclination to manage their own investments.

All of our services are underpinned by rigorous research aimed at identifying those fund managers we believe will deliver long-term superior performance. We also have a team of expert financial planners with nationwide coverage to help clients with their pensions, retirement or Inheritance Tax planning. At Bestinvest, we pride ourselves on offering the highest levels of professionalism and expertise with transparent, competitive prices. We are pleased that our greatest source of new business is from personal referrals from existing clients.

Bestinvest has won numerous awards including Stockbroker of the Year, Low-Cost Sipp Provider of the Year and Self-Select ISA Provider of the Year at The Investors Chronicle and Financial Times Investment Awards 2013. Bestinvest also won UK Wealth Manager of the Year 2013 and Best Wealth Manager for Investments at The Investors Chronicle and the Financial Times Wealth Management Awards 2013.

Headquartered in Mayfair, London, Bestinvest employs more than 200 staff and has an extensive network of regional offices. For further information, please visit: www.bestinvest.co.uk