VCT within ISA

astreix

I'm new to VCT's - wondering if it is possible to hold VCT within ISA?

As both capital and dividend on VCT are tax free - for new money are there any advantages of investing via VCT?

I was thinking of selling some investments within my existing ISA and subscribing to a couple of VCT offerings open currently and benefit from the 30% tax relief for this tax year. Is that possible?

dunstonh

wondering if it is possible to hold VCT within ISA?

That would defeat the purpose of holding the tax wrapper. Tax wrappers exist for a reason. If you can hold tax wrappers in other tax wrappers then nothing is achieved. Its a big like trying to put a cup inside another cup rather than pouring your drink into a cup.

Reaper

astreix wrote: »

I was thinking of selling some investments within my existing ISA and subscribing to a couple of VCT offerings open currently and benefit from the 30% tax relief for this tax year. Is that possible?

Yes, but only if you withdraw the cash you got for selling them from the ISA and use that to buy the VCTs.

astreix

Thanks for the responses. I think the first question is if it is possible and secondly does it makes sense doing it.

Is it possible - Just now googling I saw that one provider - Octopus has VCT eligible for ISA. (https://www.ftadviser.com/investments/2017/09/12/octopus-allows-investment-in-vct-via-isa/)

Why do it? I can use £200k within my ISA to invest in VCT now and reduce my tax bill for 17/18, whereas I don't have the same amount of investible cash available outside ISA before end of the year.

Why not withdraw cash from ISA? - because after 5 years when I liquidate the VCT I can keep the money within ISA wrapper.

dunstonh

I hadnt seen that VCT option but then i haven't had the need to research VCTs in a long time as it is rare option for people to use. It's not the sort of thing you run every day. I havent got time to read it now although I am going to add it to my list.

Reaper

Interesting, thanks for that. Always good to learn something new.

astreix wrote: »

Why not withdraw cash from ISA? - because after 5 years when I liquidate the VCT I can keep the money within ISA wrapper.

I'd be careful with that plan. You often get a poor price for selling old VCTs so personally I would recommend planning to hold them for longer than 5 years to benefit from the income before taking a likely hit on the sale.

mostwelcome

Great question. I've wondered this for years – and you're right, Octopus Titan is the first to make a way to do it.

You're not alone in wondering why it would be worth doing, and as you can see from dunstonh’s reply a lot of people familiar with VCTs shrug at the idea, but I think you've hit the nail on the head:

astreix wrote: »

Why do it? I can use £200k within my ISA to invest in VCT now and reduce my tax bill for 17/18, whereas I don't have the same amount of investible cash available outside ISA before end of the year.

Why not withdraw cash from ISA? - because after 5 years when I liquidate the VCT I can keep the money within ISA wrapper.

The way I see it this is precisely the “use case”.

The only thing to consider is whether you have time this tax year, i.e. how long it can take for some ISA provider to get around to actually fulfilling your transfer request. If you do it now you might only just get the funds across in time for tax year end. I guess some providers are more sluggish than others when it comes to pulling funds off their platform. Disgraceful I know but it seems to be a factor.

If you need to get it done in 17/18 for speed there is a broker Wealth Club that does fully electronic application forms so at least you don't have the Royal Mail to worry about.

I'm still doing VCTs the old fashioned way but it's good that ISA is now an option for those wanting to use cash and not lose any of the shelter.