Autumn 2004 Newsletter Contents All Change For Pensions Gift House? Job Security? A Pile Of Paper What's A Car? Not Available? Selling Up Party Time One Careful Owner Subbies Shock Housewarming Present Feeling Charitable? Nothing Ventured Brown Envelopes School's Out Quick Response The Hokey-cokey Mobile Workforce You Should Have Said... Whose Business? Taxman Pays Up

Nothing Ventured The Government is keen to promote investment in some types of business - particularly small, unquoted trading companies. They believe that making finance available for these entities is good for the economy and for jobs. The problem is that such investment is risky, so they have to give investors a tax incentive. For several years, the incentives for investing in new shares in Venture Capital Trusts have been considerable - you have been able to get back 20% income tax on the cost, and also to postpone payment of CGT on a gain of the same amount. So if you had a capital gain of £100,000 and put that much into new VCT shares, you could delay paying £40,000 and also get back £20,000 immediately. The VCT shares themselves are free of CGT on gains and free of income tax on dividends - if there are any (as VCTs have to invest in those risky small unquoted trading companies). This year, they have improved the income tax relief - 40% off instead of 20%, and on up to £200,000 a year - but taken away the CGT postponement. This is not a bad exchange, particularly if you have no gains to postpone. Your investment of £100 only costs you £60, and the income tax refund is permanent if you keep the shares for at least 3 years. Strangely, you get 40% back even if you are a basic rate taxpayer, which is a particularly good deal. The changes were made by s.94 and Schedule 19 FA 2004. There are also some changes to what a VCT can invest in, but these will mainly be of interest to fund managers. Apparently, the change - increasing the income tax relief and abolishing the CGT relief - is in response to requests from VCTs who have found it hard to raise money in a falling market. Apparently people have only been really keen to invest in VCTs if they can postpone their gains - this perhaps suggests that the tax break is the only thing that makes the investment attractive, which is a dangerous policy to use when deciding where to put your money.