Specialist Investments or High Risk Investments

VCTs are set up as companies and are typically listed on the London Stock Exchange. When you invest, you acquire shares in the trust and gain indirect exposure to the companies, typically 30-70 of which the VCT is invested in.

EIS funds differ in that you invest directly in 5 -10 individual companies selected by the fund manager, chosen according to their investment strategy. These therefore tend to be even higher risk than VCTs due to increased concentration. The maximum you can invest tax efficiently into an EIS is usually one million pounds per year, increased to two million pounds for ‘knowledge intensive companies’.

The rules around these investments are complex and require careful consideration. At a glance, the taxation rules are shown in the table below the FAQ's.

It is important to note however that in order to qualify, and remain qualifying for the tax relief, investments held within a VCT must be held for a minimum of 5 years and 3 years for EIS.

Generally, these investments are only suited to well experienced investors and those whom have already maximised their pension & ISA allowances. They can also be useful for those who have recently come into large amounts of money, through the sale of a business, property or from inheritance.