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First time VCT(s), or maybe not?
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- Lemon Pip
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First time VCT(s), or maybe not?
Never done them before and not much time left this tax year.
Tax bill over £100k in 2017/18 but will be peanuts moving forwards as I'm retiring and will be in 20% band. I have lots of cash to hand but very little fresh money arriving due to new (not) working status. I have zero DB pension so it's all really down to how I use savings to fund 35+ years of retirement.
So, I do get a shift on and put (maybe) £20k-£30k into a few different VCTs or keep sitting on my hands?
All feedback welcome.
Tax bill over £100k in 2017/18 but will be peanuts moving forwards as I'm retiring and will be in 20% band. I have lots of cash to hand but very little fresh money arriving due to new (not) working status. I have zero DB pension so it's all really down to how I use savings to fund 35+ years of retirement.
So, I do get a shift on and put (maybe) £20k-£30k into a few different VCTs or keep sitting on my hands?
All feedback welcome.
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- Lemon Slice
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Re: First time VCT(s), or maybe not?
The Lemon Fool has put this health warning on VCTs
"Sophisticated and complex high-risk tax-sensitive investments in small companies: handle with care"
I have been investing in VCTs for over 20 years and I can tell you, you ignore that warning at your peril particularly as it is coming to the end of the tax year and all the best VCT offers have closed. I am not going to invest in any of the offers currently open : I wouldn't even consider them.
If tax is the major consideration for you then consider topping up your pension pot instead but don't let the tax tail wag the dog.
"Sophisticated and complex high-risk tax-sensitive investments in small companies: handle with care"
I have been investing in VCTs for over 20 years and I can tell you, you ignore that warning at your peril particularly as it is coming to the end of the tax year and all the best VCT offers have closed. I am not going to invest in any of the offers currently open : I wouldn't even consider them.
If tax is the major consideration for you then consider topping up your pension pot instead but don't let the tax tail wag the dog.
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- Lemon Slice
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Re: First time VCT(s), or maybe not?
Don't forget that you also have the option of investing in EISs next year but carrying back the relief to this year. Sadly this does not work with VCTs.
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- Lemon Pip
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Re: First time VCT(s), or maybe not?
EIS is a thought.
As for pension, mine is officially "finished" with me having exceeded LTA and also TAA for this year.
As for pension, mine is officially "finished" with me having exceeded LTA and also TAA for this year.
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- The full Lemon
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Re: First time VCT(s), or maybe not?
I haven't been following which are still open, but H-L list a few stables I hold or would consider (RNS from Maven just this morning made comfortable reading).
To the OP - browse this boards archives for reasons people are cautious just now, then make your own decision. In summary, a suspicion of too much money chasing a reduced pool of good opportunities:
- Rule changes kill off the MBO gravy-train that has helped some VCTs storm ahead in recent years.
- Flood of money from rich investors and pension rule changes.
Those same factors will affect EIS opportunities, which are fishing in exactly the same pool.
To the OP - browse this boards archives for reasons people are cautious just now, then make your own decision. In summary, a suspicion of too much money chasing a reduced pool of good opportunities:
- Rule changes kill off the MBO gravy-train that has helped some VCTs storm ahead in recent years.
- Flood of money from rich investors and pension rule changes.
Those same factors will affect EIS opportunities, which are fishing in exactly the same pool.
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- 2 Lemon pips
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Re: First time VCT(s), or maybe not?
I think that if you have to ask that question then the answer is probably no. It is unwise to invest in things that you dont understand.
As BBB has pointed out the best deals this year have gone and as UncleEb has mentioned we are most likely entering an uncertain period for VCTs.
As BBB has pointed out the best deals this year have gone and as UncleEb has mentioned we are most likely entering an uncertain period for VCTs.
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- Lemon Quarter
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Re: First time VCT(s), or maybe not?
I think Uncle's summary of the cautions applicable to VCTs is appropriate. However I still feel that there are VCTs out there with a decent portfolio of investments which are likely to provide a reasonable return. Both my wife an myself started investing modestly in VCTs around 2005, and we have been pleased with the results. Our initial thoughts were that the VCTs would be high-risk with possibly a high return - and they would add a bit of spice to our (much larger) conventional equity investments. In practice, the opposite has been true - their capital value (post tax) has increased modestly, but there has been a steady stream of tax free dividends.
Looking over the VCTs that are currently open, I currently own Elderstreet, Maven, Pembroke and Amati. I previously owned Octopus Titan and Hargreave Hale.
My thoughts on these are as follows - I don't think I'll be adding to Elderstreet and Pembroke in the next year, partly because of their exposure to restaurant investments. I may think about Maven next year - I'm also comfortable with their recent pronouncements. I am currently planning to sell an Amati 2 investment which has reached its 5-year tax hold, but I may re-cycle back into Amati after the required 6 month wait. I previously sold Hargreave Hale for the same reason, and may also re-cycle back into it. I get a feeling that Octopus Titan is now too large, and although I had a good return from its initial launch, I am unlikely to re-invest.
Looking over the VCTs that are currently open, I currently own Elderstreet, Maven, Pembroke and Amati. I previously owned Octopus Titan and Hargreave Hale.
My thoughts on these are as follows - I don't think I'll be adding to Elderstreet and Pembroke in the next year, partly because of their exposure to restaurant investments. I may think about Maven next year - I'm also comfortable with their recent pronouncements. I am currently planning to sell an Amati 2 investment which has reached its 5-year tax hold, but I may re-cycle back into Amati after the required 6 month wait. I previously sold Hargreave Hale for the same reason, and may also re-cycle back into it. I get a feeling that Octopus Titan is now too large, and although I had a good return from its initial launch, I am unlikely to re-invest.
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- Lemon Pip
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Re: First time VCT(s), or maybe not?
Hi Scotia,
had a quick peek at the Elderstreet website but couldn't find any exposure to restaurants. Which restaurants and what percentage of the portfolio. Bought a tranche last year so pretty committed for another five years whatever.
Cheers SB
had a quick peek at the Elderstreet website but couldn't find any exposure to restaurants. Which restaurants and what percentage of the portfolio. Bought a tranche last year so pretty committed for another five years whatever.
Cheers SB
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- Lemon Quarter
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Re: First time VCT(s), or maybe not?
had a quick peek at the Elderstreet website but couldn't find any exposure to restaurants
Apologies - I had one of those Senior moments, and was thinking about the Chrysalis portfolio. Both of these VCTs (Elderstreet and Chrysalis) benefited considerably from an investment in Wessex Advanced Switching Products - hence the false correlation in my mind. Possibly I should have added that I originally purchased Elderstreet as an end of season addition to balance out the tax on a late consultancy fee - and I was pleasantly surprised by the result! Hopefully the tie-up of Elderstreet with Draper Esprit will add to its attraction. And I unreservedly withdraw my aspersions in regard to its restaurant connections!
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- Lemon Slice
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Re: First time VCT(s), or maybe not?
scotia wrote:... I am currently planning to sell an Amati 2 investment which has reached its 5-year tax hold, but I may re-cycle back into Amati after the required 6 month wait....
As there are still two Amati VCTs you can almost immediately invest in the other if you sell one. As far as I can tell they have almost the same investments but as always DYOR.
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- Lemon Quarter
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Re: First time VCT(s), or maybe not?
As there are still two Amati VCTs you can almost immediately invest in the other if you sell one
That was my original plan - with a new investment in the other Amati VCT at the start of the next financial year (18/19). But Amati are planning to merge the two VCTs, with meetings on the 26th April and 4th May. So I probably can get in before the actual merger, but not before its announcement. So I'm a little bit twitchy about the ramifications, and I may end up waiting the 6 months. And in future, I most definitely will need to wait the 6 months. I wonder if VCT managers (e.g Amati and Hargreave Hale) who are combining their VCTs are aware of this disadvantage to an investor.
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- Lemon Pip
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Re: First time VCT(s), or maybe not?
I think you are correct to be twitchy. Am sure I read some Amati notes to this effect. IMO, You may invest in 2 having sold 1 before a merger announcement, but 6 months applies if you knew about the potential merger.
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- Lemon Slice
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Re: First time VCT(s), or maybe not?
Amati managed to get a special measure introduced in the last budget - can't exactly remember what it was now - but why not give them a ring - they are usually very helpful - regards - BBB
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- Lemon Slice
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- Lemon Quarter
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Re: First time VCT(s), or maybe not?
Perhaps this helps.
Thanks for the link. This looks like a mess which is open to multiple interpretations. If I sell Amati 2 now, and buy Amati 1 in Mid April, and the two funds merger in June, then I'm not sure how HMRC would interpret these rules. I'll wait the 6 months!
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- Lemon Slice
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Re: First time VCT(s), or maybe not?
127tolmers wrote:Perhaps this helps.
http://www.gabelletax.com/blog/2017/11/ ... rovisions-commercial-mergers/?dm_i=YJL,5B40H,Q4TYYJ,KHF2A,1&utm_source=Main+List&utm_campaign=894bd532af-Our+Comprehensive+Autumn+Budget+2017+Review&utm_medium=email&utm_term=0_997aa37440-894bd532af-242625321
Thanks, Robin - good link. the relevant bit in the link is
which was put in at the request (my guess) of AMATI so giving them a ring for clarification is a good option.The government will legislate in Finance Bill 2017-18 to limit the application of the anti-abuse rule relating to mergers of VCTs. Income tax relief may no longer be withdrawn where the relevant VCTs merge more than two years after the subscription, or the merger takes place for commercial reasons where it is not one of the main purposes to obtain a tax advantage.
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