New figures from the Association of Investment Companies (AIC) show that Venture Capital Trusts (VCTs) had a good year for fund raising in 2010/11.
In fact, fund raising levels were at their fourth highest since VCTs were launched in 1995.
Overall during the last tax year, VCTs raised funds of £365m.
This represents a 6.1% increase on the level of funds raised in the previous tax year but remains a long way behind the record £779m raised in 2005/06.
VCTs were launched in the mid-90’s to encourage investment in a range of small higher-risk trading companies. They offer generous tax breaks for investors, including 30% income tax relief on new investments and tax-free dividends and capital gains.
Whilst VCTs are likely to become even more popular in a higher taxation environment, investors should think carefully before investing.
They do represent a higher risk investment proposition and investors must never allow the tax tail wag the investment dog.
Photo credit: Flickr/alancleaver_2000
