VCTs: Thirty years and still growing strong

Thirty years on from the announcement of Venture Capital Trusts (VCTs) a lot has changed, but investor demand continues to grow and underlying companies continue to thrive.

Investments into VCTs have reached £239.8 million this tax year, a 19.7% increase year-on-year (tax-year to 27 November).

Underlying companies also continue to grow strongly. Wealth Club research shows that over a quarter (27.9%) of VCT investee companies saw revenue grow by 50% or more last year versus just 1.4% for the main market.

43.2% of VCT investee companies grew revenue by 25% or more, versus just 7.1% for the main market.

12.6% of VCT investee companies saw revenues fall, versus 45.9% on the main market.

Nicholas Hyett, Investment Manager, Wealth Club said, “Demand for VCTs continues to go from strength-to-strength as the UK’s premier venture capital investment vehicle approaches it thirtieth birthday. Total VCT investment this tax year is approaching £240 million, up nearly 20% year-on-year.

As the tax burden continues to climb VCTs are one of the few tax efficient investment options still available to high net worth investors. Pensions tax relief has been raided again and again, while frozen tax thresholds and allowances mean people are paying more and more tax. VCTs, with their 30% income tax relief up front and tax-free dividends and capital growth are one of the few tax reliefs to have survived the last budget unscathed.

That immunity in a tax hiking budget is well deserved. The report launched by the AIC today shows VCTs have funnelled billions of pounds into UK start-ups, with current VCT backed companies employing 92,000 people in the UK. These are exactly the kind of fast growing, innovative companies the UK needs.

“Wealth Club research shows that revenue growth among VCT backed companies far exceeds those of main market listed companies – driving the economic and productivity growth that will ultimately be key to the UK’s economic success and to delivering attractive returns to investors.

Thirty years on VCTs are a fantastic UK success story, showing what happens when business, the government and investors all pull in the same direction.”