Low Risk Venture Capital Trusts To Go

Published / Last Updated on 09/03/2018

Venture CapitalThis news may not affect many investors but certainly those that are feeling the 'pinch' on ever higher taxes may be interested.

  • If you are a higher earner and you are restricted to a pensions annual allowance of just £10,000pa with tapering or
  • If you have 'maxed' out on your ISA allowances or
  • You are a higher rate tax payer and a landlord and you are getting squeezed by expenses relief on mortgage interest being gradually restricted to a basic rate tax credit

Then for some, the next port of call was venture capital trusts (VCTs) and enterprise investment schemes (EIS) with tax relief allowed at 30%.

What's the issue?

In the Budget in November 2017, the Chancellor announced that he was going to tackle those taking advantage of tax breaks on VCTs and EIS when investing in 'lower risk' business ventures.  In short, introducing a 'risk to capital' condition to ensure that investments were channelled to newer and smaller higher risk ventures than simply investing in lower risk venture businesses that were more likely to succeed and still get your tax break.  The principle being that VCTs and EIS are there to provide funding for real venture businesses.

The budget gives rise to the Finance Bill 2017-18 and then becoming law i.e. Finance Act 2017-18.  The process of it becoming law is Royal Assent (in simple terms, the Queen 'signs it off').

Royal Assent for the Finance Bill 2017-18 has been postponed, it should have received Assent yesterday, but has been postponed until 15 March 2018.

Why mention it?

It means if you are a higher earner and looking for tax breaks in a lower risk investment route, you have just 1 week to do so.  After this, it is back to business as usual for medium and higher risk investments using VCTs and EIS for businesses looking to raise capital.