Venture capital trusts are a way for investors to put money into smaller companies and they are usually available from specialist investment firms designed for investors who are okay with taking a higher risk. Generally these firms will also offer advice on which companies to invest in and will be able to tell you about which firms are most promising in an area you are particularly interested in.
The reason these type of investments are so popular is because they are tax efficient. There are certain conditions that companies must meet if they are eligible for this sort of investments and generally they will have to have assets which are worth less than £7 million. The enterprise must also have less than 50 people working for it on a full-time basis and these are just two of the many criteria that must be met.
Tax relief on these types of investments for this year is set at 30 percent. This is taken off your income tax payments and it would be better to view the money as something that is repaid to you, rather than something that is taken off immediately.
When you are doing your self-assessment tax return it is important that you remember to claim everything that you are entitled to through these investments. Otherwise you are going to get no real benefit from this type of investment as the primary reason people invest in these things is for the tax benefits.
Tax relief can start happening from the first moment you invest. This means that if you invest £20,000 you’re immediately going to be entitled to £6000 in tax relief. There is an additional condition, which is designed to ensure that investors keep their money in the investment. This is that if you take you money out in the first two years, you have to pay the tax back to the government