VCTs primed for action

The cash holdings of venture capital trusts (VCTs) have increased for another year, with funds totalling £816 million for the 2010-11 tax year - a jump of more than 3.5 per cent on the year before, research reveals.

With businesses emerging from the doldrums of the downturn, access to capital to fuel growth and ambition is greater than ever. The research compiled by Business XL shows that VCTs are flush with cash and ready to invest in growing businesses.

With a 16-year history, VCTs offer investors the opportunity to claim 30 per cent of their investment against their income tax bill. Additionally, there is also the added benefit of tax-free dividends and no capital gains tax on the disposal of VCT shares if they are held up to five years.

The research shows that after fundraising for the 2010-2011 tax year, the total amount held by fund managers has increased to £816 million compared with £787.8 million in the 2009-10 tax year.

The VCT Report 2011 also finds that there have been three new management entrants to the VCT market this year, which are Longbow Capital, Hazel Capital and Committed Capital VCT.

With 35 VCT fund managers now in the market, the top five managers hold 48 per cent of all funds, up from 44 per cent in 2010. The largest of managers is Octopus. The amount raised by AIM-focused VCTs has reached £29 million, the best showing on the junior London market since 2006-2007.

At a time when cash generates little interest in the bank, VCTs have become increasingly popular as a source of capital.

The recent VCT changes announced in the 2011 Budget offer good news for small and growing companies as well as investors, with the maximum gross asset figures below which companies qualify for VCT investments rising from £7 million to £15 million.

George Osborne’s announced alterations to VCT investment combined with the healthy coffers that fund managers now have at their disposal mean that aspiring companies now have even greater access to venture capital than before.

Todd Cardy

Todd Cardy

Todd was Editor of between 2010 and 2011 as well as being responsible for publishing our digital and printed magazines focusing on private equity and venture capital.

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