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VCTs to benefit in HNW switch from pensions

Advisers believe the abolition of high-rate tax relief on pension contributions will increase the popularity of venture capital trusts among high-net-worth individuals.

Industry experts welcome Budget measures which gave enterprise investment schemes greater flexibility to carry back income tax relief and relaxes the timing rules for VCTs and corporate venturing schemes when using money raised from investment. But they are disappointed that the 30 per cent income tax relief for VCTs was not enhanced to stimulate the supply of finance to smaller companies.

Chelsea Financial Services head of investment products Matthew Woodbridge believes the decision to taper tax relief to 20 per cent for people earning over £150,000 will boost VCTs.

He says: “Isas have been upgraded but if you are earning half a million pounds a year, a ten grand Isa is not really going to rock your world. With the reduction of tax relief on pensions, VCTs may come more to the fore in tax planning for the ultra-high-net-worth.”

AWD Chase de Vere Advanced Wealth Management senior manager Jason Walker says: “I think they will be a great option to look at for high-net-worth clients this year, especially the VCTs with a more cautious approach.”

But VCT specialist Matrix Private Equity Partners chief executive Mark Wignall believes smaller VCTs will come under pressure this year. “If they are not consolidated, I do not see a future for them.”

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