Business, Legal & Accounting Glossary
An investment trust that provides risk capital for smaller unlisted trading companies. A venture capital trust is similar to an investment trust in that it invests the money it receives in other businesses. In this instance, the businesses it invests in are new or unquoted companies that are looking for development capital. As such venture capital trusts are relatively high-risk investments. For investors willing to take on this risk there are income and capital gains tax benefits.
A Venture Capital Trust (VCT) is a investment trust that provides risk capital for smaller unlisted trading companies.
A Venture Capital Trust (VCT) is a investment trust that provides risk capital for smaller unlisted trading companies.
The trust managers accept sums of money from investors who wish for a share in the profits of the trust. This form of investment is relatively high risk but does however gain certain tax advantages in the UK, in that any profits are free of capital gains tax and that income is untaxed.
They also have additional advantages in that £200,000 may be invested in any given year and that 30% of any investment in a VCT can be claimed back from previously paid tax, provided that the VCT is held for 5 years.
By investing a taxable gain in a VCT that is held for 5 years, payment of the Capital gains tax may be deferred until the VCT investment is sold (and the annual exemptions from capital gains tax can be carried forward).
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This glossary post was last updated: 26th April, 2020 | 0 Views.