SJP - VCT Guide

GUY TOLHURST MANAGING DIRECTOR, INTELLIGENT PARTNERSHIP Introduction This guide is designed as a practical and impartial reference document, providing concise and common-sense assistance with the technical, planning and legislative aspects of using Venture Capital Trusts (VCTs). Relevant case studies, an outline of the rules and updates on rule changes give clarity on when and how VCTs can be helpful. Useful tips on how to assess VCT offers and providers, as well as client suitability considerations inform Partners on making the best use of the VCT tax reliefs. While the key focus of this guide is the practicalities of using VCTs, the focus of our regular VCT Industry Report is on opinions, forecasts, research, market analysis, including current key metrics and provider and adviser discussions. This insightful resource is also available free of charge from Intelligent Partnership. Learning Objectives After reading this guide, Partners will be able to: • Apply the main rules and practicalities that govern the VCT reliefs available. • Explain the main risks associated with VCT investments. • Define the key aspects that need to be taken into account when considering client suitability for a VCT investment. • Evaluate the main considerations for a VCT investment and investment provider. • Access planning examples that can apply to real-life situations. • Ascertain the circumstances in which VCT reliefs can be withdrawn . • Assimilate the information needed to successfully complete the SJP VCT accreditation exam. A publication like this is rarely the product of one organisation’s efforts; to ensure that it is up to date, comprehensive, accurate and captures all of the key issues requires a wider input. We’ve had plenty of help producing this Guide and would like to thank Technical Connection. Their input is invaluable. but needless to say, any errors or omissions are ours. Most of all we would like to thank Matthew Woodbridge, Paul Matthews, Kelly Sumal, Helen Longland and Leslie Uzan of St. James’s Place Wealth Management. It would not be possible to produce educational material like this without their generous support and contribution. Acknowledgements MATTHEWWOODBRIDGE HEAD OF DIVISION, ALTERNATIVES, ST. JAMES’S PLACE WEALTH MANAGEMENT Offering the highest quality financial advice is dependent on Partners having the knowledge and understanding to identify and apply the most suitable options for their clients. And it’s essential that that knowledge and understanding keeps pace with all the developments that affect those options. That’s why St. James’s Place values ongoing training so highly and recognises the importance of meeting regulatory requirements. The UK’s venture capital schemes, such as Venture Capital Trusts (VCTs) and Enterprise Investment Schemes (EISs) can be valuable tools for financial planning. And, before using them, Partners must be fully aware of the fundamentals and nuances that come with them. Venture Capital Trusts (VCTs) saw a bumper year for investments in 2018 and indications are that demand for VCTs from investors remains strong, despite rules changes announced in the 2017 Budget that tightened Opening Statement the criteria for VCT qualification. But the generous tax reliefs were untouched, offering investors 30% upfront income tax relief and tax-free dividends and growth. The previous speculation that VCTs might be scrapped has been replaced by confidence that the government sees them as important drivers of the UK economy, identifying young companies with exciting growth potential and matching them with investors who understand and accept the risk and reward characteristics. This is where Partners are so crucial. With restrictions on pensions and buy-to-let continuing to bite, and the ever-encroaching dividend tax, tax-efficiency is not always easy to come by. But not every client has a need for a VCT investment and of those that do, some will not be comfortable with the risks. For those that are and for whom a VCT is suitable, there are other considerations: the new regulations have translated to fewer qualifying investments and selecting the right VCT managers, with access to the best deals and strategies is key. Partners need to be well-acquainted with the latest rules, industry information and how to determine when and how to use VCTs effectively. Like any tax relief, there are technicalities and pitfalls. But with the right insights they can be mastered and avoided. This guide gives SJP Partners a thorough understanding of the nuts and bolts of VCTs. Its aim is to highlight the practicalities and nuances to make the most informed decisions for the best client outcomes.