What happens after I invest?
Claiming tax relief
The first step is to claim your tax relief.
You claim the relief in your tax return for the year in which the shares were issued. There is a section on the form dedicated to VCTs. You will then be repaid the income tax by HMRC via your tax code, as a lump sum rebate or, if self-employed, a reduction in Schedule D tax.
Once your shares have been issued, the VCT will provide you with a tax certificate. This might be required by HMRC as proof of your investment.
Monitoring your investment
The main considerations when assessing the performance of your VCT are:
The net asset value (NAV) – this will give you a view of how the underlying holdings have performed The dividends paid to date
The VCT manager's annual report & accounts – the latest version of which is also available via our website – contains information on how the VCT has performed.
Dividends can be received via cheque or be paid directly into your bank account. If you want dividends paid into your back account you should complete the appropriate section on the VCT application form. Dividends from VCT investments are tax-free and do not need to be included on your tax return.
Realising my investment
A VCT must be held for a minimum of five years in order to permanently keep the tax relief. At any time after this point a VCT can be sold on the open stock market, just like any other UK-listed share or investment trust. For full details on how to sell your VCT shares in this way, including the associated charges, please contact our dealing desk on 0117 980 9800.
However, before selling on the open market you should also contact the VCT manager who might be able to buy back the VCT shares from you at a better price. Because VCTs are specialist investments which are not widely held by investors the share price can often be significantly lower than the value of the underlying assets (this is known as trading at a discount to NAV).
In order to make it easier for investors to sell their shares many VCT managers periodically offer to buy them back at a better price than is available on the open market – typically at a 5% to 10% discount to NAV, although this is not guaranteed.