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So in the UK the tax law on dividends is changing meaning a reasonably hefty increase in tax for 2016.

Therefore there's an opportunity to take as much dividend as possible now to reduce future tax. Fine. Makes sense.

The flip side of that I've seen on a few websites advise about using this "opportunity" and funnily enough these websites then also push the idea of investing a significant chunk into a VCT or SEIS scheme so you can claim back all that tax.

However it seems to me that VCTs are very edge case, and in most cases strongly advised against - so what is the opinion on these things, if anyone can actually claim to be independant? Indeed the government themselves only advises them if you have an enormous amount of spare cash. (yeah, thats pretty much what they say!)

On the other side there's crowd funding, but then you have to pick the individual scheme much more carefully - and to spread risk i guess you'd need to get into lots of schemes, and that means a lot of paperwork!

Given that, Is it wise to advise the use of an SEIS or VCT to offset a one-off large tax bill?

  • What's your question in a nutshell? "Should you invest in VCTs given the pending tax change on dividends?" "Is the VCT or SEIS scheme legitimate?" What do you want to know? – Alex B Oct 20 '15 at 18:46
  • Ok how about this as clarification "Is it wise to advise the use of an SEIS or VCT to offset a one off large tax bill?" – Codek Oct 21 '15 at 8:11
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One problem with VCT is that you get tax back when in invest in newly issues stocks in a VCT. But when you wish to get your money out, you must sell your current stock, and the person buying them does not get any tax back. So why should they buy 2nd hand VCT stocks from you rather than buying newly issued VCT stocks?

I assume that the dividends on VCT stocks are outside of the new dividend tax, as dividends on VCT stock have always been free of income tax – if so high yielding “2nd hand” VCT stocks may find a market.

A VCT is a LONG TERM investment for income, that is hard to sell due to the low number of people trading in them. Some VCT make lots of money for their investors, most have just about broken even, with the tax rebate taken up by the high costs of managing a fund that with lots of small investments in small companies.

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