Venture Capital Trusts were introduced in 1995 to encourage investments into the small and medium company sector. A VCT is a quoted investment company listed on the London Stock Exchange similar to an investment trust which offers income tax incentives to new investors. VCTs must be approved by the Inland Revenue.
Tax relief is available only to individuals aged 18 years or over and not to trustees, companies or others who invest in VCTs.

There are two income tax reliefs:

• Exemption from income tax on dividends from ordinary shares in VCTs

• Income tax relief at the rate of 30% of the amount subscribed by the individual for new ordinary shares provided that the shares are held for at least 5 years (3 years for shares issued prior to 6 April 2006).

Capital gains tax relief:

• Exemption from CGT on gains that arise if you dispose of your ordinary shares in VCTs.

Maximum investment is £200,000 per tax year.