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Julian Gibbs

In my opinion, venture capital trusts investing in the Alternative Investment Market are one of the most underrated investments now available because of the tax breaks for investors, who can claim 20 per cent tax relief and, for those lucky enough to have capital gains, up to 60 per cent relief.

Out of the 15 Aim VCTs launched so far, only three would not have showed any profit, taking into account the 20 per cent tax relief based on net asset value plus dividends.

The only shares available at present which qualify for tax reliefs are in Pennine Aim VCT, where Rathbone is launching a C-share top-up issue.

Pennine and its sister fund, Pennine Aim 2, are the best performing Aim VCTs over three and five years. Over five years, the net asset value plus tax-free dividends have shown investors a profit of 33 per cent. On the gross amount invested, this is equivalent to over 66 per cent for those who were able to claim 20 per cent tax relief and 232 per cent for those who were able to claim 40 per cent capital gains tax rollover relief – a much higher return than any unit trust investment.

Investors are likely to receive tax-free dividends, an ideal supplementary income. The performance of Pennine VCT is particularly good when compared with the Aim market as a whole, which has fallen by 80 per cent from its high of 2,750.

Its investment management team is led by Michael Cunningham, a director of Rathbone. While still carrying more risk than mainstream unit trusts, the tax reliefs and tax-free dividends from VCTs offset this extra risk.

I believe that all investors who are prepared to take a long-term view and who are higher-rate taxpayers should consider Aim VCTs as part of their portfolio and, with the Aim market at very low levels, this particular one could should to be a winner.


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