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VCTs get set for 600m boom

The VCT market is predicted to take 500m-600m this season as investors clamour to invest amid concerns the tax breaks will not be renewed.

The Chancellor is expected to announce a decision on the extension of the 40 per cent income tax relief on VCTs in the Budget in March, with commentators differing over whether the breaks will con- tinue or be reduced in increments of 10 or 20 per cent over the next two years.

As a result of the uncert- ainty, many expect a last-minute rush on VCTs once the position has been made clear, particularly if the Chancellor looks set to reduce allowances. Around 40 launches are in the pipeline.

Baronsmead VCT 3, managed by Isis equity partners, closed in December, having taken 24m and the firm is planning to launch a fourth VCT this month. Bestinvest, the UK’s top VCT introducer by sales volume last year, says it is seeing massive advance demand for VCT 4.

Bestinvest’s top-selling VCTs so far this tax year are Baronsmead 3, Eclipse 3&4, Core 2&3, Close IHT Aim and Pennine Aim VCT 6. Generalist VCTs account for 32 per cent of the firm’s 165m VCT sales, with private equity, Aim, specialist and asset-backed products the next most popular.

Of the VCTs still open to investors, industrywide figures collated by Tax Efficient Review editor Martin Churchill show the Close IHT Aim VCT has attracted the highest percentage of its target so far, raising 44 per cent of the 25m sought through A and B share issues.. The highest amount of money raised is 21m by Eclipse VCTs 3 & 4, which are both seeking 60m.

A number of specialist VCTs have been brought to market, with many aiming at short-term investors while offering a degree of downside protection. Among these, the Chrysalis VCT E-share issue offers exposure to art and antiques while the Downing Protected VCT invests in pubs and secured contracting. Edge Performance invests in event licensing while the Ingenious Music 2 VCT invests in recording contracts.

Churchill says: “With so much competition, those VCTs with long track records are lik- ely to raise enough to hit their targets but the new breed of specialist VCTs should prompt IFAs to ask their clients whether they are investing over the long term or for a shorter-term exit.”

Bestinvest business development manager Justin Modray says: “Once again, overall sales have been dominated by a handful of key providers with Baronsmead leading the pack.Unsurprisingly, investors and advisershave beenattracted bythe established providerswithreasonable trackrecords.Innovative structures such as the CloseIHT Aim VCT and Ingenious Music VCT 2have also proved popular.”

ANNOUNCED VCTs

Aberdeen growth opportunities VCT C share 15m C-share issue to this 9m fund, open JanuaryBaronsmead Aim VCT First Aim VCT from Isis, opening mid-FebruaryBaronsmead VCT 4 share C-share issue seeking 20, opening FebruaryChrysalis VCT C share Seeking to raise up to 25m in two share classes, one in unquoted companies and one in the trading stock of reputable art and antique dealersIbis Media VCT i & II Two self-invested media VCTs, open mid-JanuaryIcon Asset VCT Intending to generate income from asset-backed, secure investments in established companies in the programme distribution industry, 10% will go into Aim companiesInvesco Perpetual Aim VCT further issue Further issue of shares in this Aim-based VCT run by Anthony Crossley, open mid-JanuaryKeydata income further issueFurther issue for wind farm VCT, open November, seeking 30mRensburg Aim VCT further issueFurther issue of ordinary shares to raise 10, open January

Source: Tax Efficient Review

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