Introduced in 1995 to encourage investment in small and start-up companies. Individuals invest in a quoted vehicle which in turn invests in the debt and equity of a spread of unquoted smaller companies.

A VCT is a company whose shares are listed on an EU Regulated Market and which complies with various other requirements.

An individual investor in a VCT is entitled to 30% income tax relief on the amount invested up to £200,000 provided that the investor’s VCT shares are held for at least five years.

Investors in VCTs also receive an exemption from capital gains tax on any gains on the sale of the VCT’s shares and exemption from income tax on dividends from the VCT. The VCT itself will not pay tax on dividends received from its investee companies but will be taxed on interest received. It is also exempt from tax on chargeable gains on the disposal of its investments.

For further details, see Practice note, Venture capital trusts.

When considering the term venture capital trust in the context of financial services, reference should be made to the FSA Handbook (before 1 April 2013) or FCA Handbook (from 1 April 2013) glossary definition of venture capital trust.