It is interesting, but also a tad worrying, that half of high networth investors (HNWI) have never heard of venture capital trusts (VCTs), despite the beneficial tax breaks offered by these products, according to the latest research.

Albion Capital, a venture capital trust provider, surveyed 250 individuals with annual incomes above £125,000 and found 50% had not heard of the products, with a further 76% never having invested in VCTs.

A third of those surveyed said they would consider investing in the products if they were recommended to do so by a financial adviser. The number one reason people did not invest in the products was a lack of knowledge, it was revealed. This creates an obvious opportunity for advisers to fill the gaping void.

There is a huge captive market of HNWIs in the UK. According to Capgemini’s 2018 World Wealth Report, there were 575,000 HNWIs resident in the UK in 2017, holding approximately £1.6trn in wealth.

VCTs are investment funds listed on a stock exchange that invest in unquoted companies. Investors who hold the shares for five years receive a 30% income tax break, while any income earned from the investments in the trust is exempt from income tax.

Last year the Treasury changed the rules on the types of companies into which VCT managers deploy capital, as it wanted the products to focus on riskier assets, arguing they had not always been used as intended.

Will Fraser Allen, deputy managing partner at Albion Capital, commented on the findings:

“VCTs have entered the mainstream in recent years as a steady erosion of other tax efficient means of saving and investing has boosted their popularity.

“We were surprised by these findings, which suggest a relative lack of knowledge of VCTs’ qualities and indicate more work needs to be done to raise awareness of the tax benefits, income potential and opportunity to support exciting UK growth businesses.”


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