Subscribe to shares in VCT

Subscribe for up to £200,000 of shares in a Venture Capital Trust (VCT) in 2006/07, and you could receive a 30p tax credit for each £1 you invest. VCT shares you buy are exempt from capital gains tax on sale, but remember, VCTs can be very risky investments and you must hold them for at least five years to retain your income tax credit. A Venture Capital Trust or VCT is a highly tax efficient closed-end collective investment scheme which is designed to provide capital finance for small expanding companies and capital gains for investors.

The managers of the VCT have three years in which to choose companies to invest in and during this time often place the money into cash, gilts or bonds. As they become more sophisticated VCTs are investing in funds such as smaller company funds or funds of hedge funds, to maximize returns. VCTs may invest up to £1m in a qualifying company but each individual investment cannot make up more than 15% of VCT assets. VCTs can usually be classified into three different types - AIM, Technology and General. Some trusts invest in a combination of all three areas.