Octopus Titan VCT

CheekyMikey

Just had some blurb through about a new release of shares in this…does anyone have any experience of this particular investment or similar? I have plenty in more traditional trackers and equity funds, and a lot of cash in various fixed rate bonds and easy access. I’m interested in income generation and this seems to offer good tax advantages and divi yield, but seems pretty high risk if I understand it correctly. Any thoughts?
https://octopusinvestments.com/our-products/venture-capital-trusts/octopus-titan-vct/

mostwelcome

Have held it myself since 2017.

It invests in some early stage companies hence 'high risk'. It’s also got over 100 companies in it now though. So failures like Eve Sleep barely make a dent. By the same measure, big successes haven’t necessarily produced big upside either. That is the nature of a >£1bn trust spread across many holdings.

It aims to pay regular 5p dividend, and the occasional special (e.g. 8p last year on top). VCT dividends are not taxed, they are separate to other taxable dividends, so this is 'worth' more to an income tax payer than divis from stocks, ITs etc.

There may be better VCTs in terms of dividend payers, and there are significant performance fees. But I am happy with Titan because it backs a culture of entrepreneurship in the UK, exactly what people have always said the UK economy needs, patient capital to help entrepreneurs grow large global tech companies from these shores. As an investment it has performed well over 5years despite recent climate, is well run IMO, and is in a sector I want to be in for the long term.

mad_rich

I was looking at this last week. Do you have to buy new releases of shares to get the tax relief, or can you just buy at, say HL?

Reaper

mad_rich said:

I was looking at this last week. Do you have to buy new releases of shares to get the tax relief, or can you just buy at, say HL?

Second hand VCT shares still give you tax free dividends and no capital gains on any growth, but miss out on the important 30% income tax relief.

mad_rich

Thanks. That's exactly what I was worried about, and it didn't seem well explained when I was reading.

mostwelcome

Yes as @Reaper said you’d have to subscribe to the current share offer to be able to get the upfront 30% income tax relief. The minimum subscription in the share offer is £3k, which is lower than many VCTs.

There also may be a couple of good reasons to consider it now – only if you are considering it at all, of course, and comfortable with VCT asset class, risks etc. Namely: (a) there is a dividend due to be paid in December, those whose shares are allotted in time would be eligible for it (source); (b) there is an early bird saving (= translates to 'more shares for your money') for doing it now as opposed to after 13 Jan.

Btw, in case you had not already noted, you must hold VCT shares a minimum 5 years from issue if you are claiming the upfront tax relief. (You could sell them before this period but then you would need to repay HMRC your tax rebate). 

mad_rich

Thanks. I'll give it some serious consideration. Is there a cheaper way to hold than direct with Octopus? It seems you pay 5.5% up-front whether you go via an adviser or direct.

Thirty9

About VCTs in general: I investigated them and decided against them. The tax-benefit tail definitely tries to wag the making-money dog. The fees are extortionate.

mostwelcome

mad_rich said:

Is there a cheaper way to hold than direct with Octopus? It seems you pay 5.5% up-front whether you go via an adviser or direct.

The site I linked to above re: the dividend, Wealth Club, is a specialist broker for VCTs and such. Applying through them gets you 2% initial charge currently:

https://www.wealthclub.co.uk/venture-capital-trusts/octopus-titan-vct/ 

It is run by former Hargreaves Lansdown people and is like how HL used to be i.e. good service online or by phone.

CheekyMikey

Not that anyone will be interested, but simply to bookend my original post…I didn’t go for this in the end. Reasons were a combination of my income tax bill not being enough to get maximum benefit from the tax relief and the high charges negating a fair bit of the dividend payments. Might revisit it in the future when my tax situation changes as pension income increases…