IFA 17 - VCTs                                                                        Ruth Allen/Ruthmedia

In the world of finance, the time when truly independent financial advice can add real value to your financial planning is when stockmarkets are volatile. "A perfect portfolio should always have a wide spread of asset classes, whatever the stock market conditions, but particularly so in stormy markets," says Jim McLatchie of Aitchison and Colegrave. "Whilst equities have traditionally played a major part in long term financial planning there are alternatives for those currently hesitant to expose their hard earned capital to the FTSE. Professional advice is vital for those seeking alternatives which offer tax efficiency." 

A tax concession often overlooked in connection with end of year tax planning is capital gains allowance and venture capital trusts (VCTs), which utilise this tax concession and enjoy many features which should be attractive in economic uncertainty. "With fewer investors needing to shelter capital gains made elsewhere, there have to be other, perhaps more compelling reasons to consider VCTs," says McLatchie. "When you add together the 20% income tax relief, 40% capital gains tax deferment, tax free dividends and the fact that future gains are distributed free of capital gains tax, the alternative of using VCTs in a well balanced portfolio cannot be overlooked.

"It could also be said that it is partly due to the uncertainty of the economy that the managers of venture capital are currently in a position to cherry pick the best investment opportunities. With the traditional routes to finance difficult to come by in the current climate, the fund mangers have great bargaining power. The small companies they invest in are not less profitable in these volatile times but do suffer from access to finance and this provides an excellent opportunity for those willing to invest in the Alternative Investment Market." 

With interest rates at an all time low since February 1955, achieving a good level of income is almost impossible. VCTs can offer a viable alternative, according to McLatchie : "Because venture capitalists take a medium to long term view - often 5-7 years - it is possible to provide a long term, tax free income, through the successful management of a VCT portfolio and the professional distribution of these capital gains." 

The reasons to invest in this alternative investment are as strong as ever, and the guidance of an IFA is vital. "As part of our 'due diligence' process, we put considerable resources into research and analysis, which involves meeting with the VCT companies themselves," says McLatchie. 

For advice on the offering that will suit you, or for information on other alternative but tax efficient investment vehicles contact Aitchison and Colegrave. Freephone 0800-838920 or info@a-cgroup.co.uk.