What is a venture capital trust?
Answered 11 March 2026
What the law says
A venture capital trust (VCT) is defined in statute as a company which:
- is not a close company, and
- is for the time being approved for the purposes of Part 6 of ITA 2007 by HMRC.
The abbreviation "VCT" means a venture capital trust, and "VCT approval" means an approval of a company for those purposes.
Associated tax reliefs
The legislation provides for several tax reliefs connected with VCTs:
- No income tax on dividends: Under Chapter 5 of Part 6 of ITTOIA 2005, if conditions are met, no liability to income tax arises in respect of dividends paid on VCT shares.
- CGT exemption for the VCT itself: Under s.100 TCGA 1992, gains accruing to a VCT are not chargeable gains.
- CGT exemption for investors: Under s.151A TCGA 1992, a gain or loss accruing to an individual on a qualifying disposal of ordinary shares in a company that was a VCT when the shares were acquired and is still a VCT at the time of disposal is not a chargeable gain or allowable loss.
- CGT deferral relief (historical): Under Schedule 5C TCGA 1992, an individual's unused qualifying expenditure on VCT shares could be set against chargeable gains — but only in relation to shares issued before 6 April 2004.
Eligibility for VCT income tax relief
An individual is eligible for VCT relief for a tax year if a VCT issues eligible shares to them in that year, the VCT issues the shares for raising money, and the individual subscribes for the shares on their own behalf.
HMRC guidance / practice
HMRC confirms that three reliefs are available to individuals subscribing for new ordinary VCT shares:
- 'Front-end' income tax relief on subscription
- Exemption from income tax on dividends
- Exemption from CGT on disposals
CGT deferral relief was previously available but was abolished for shares issued after 5 April 2004.
For individuals who acquire (rather than subscribe for) ordinary VCT shares (e.g. by purchasing them on the secondary market), only two reliefs are available: the CGT exemption on disposals and the income tax exemption on dividends.
HMRC also notes that the no gain/no loss rule for intra-group transfers (TCGA92/s.171) does not apply to a disposal by or to a VCT, preventing groups from exploiting the VCT's tax-exempt status.
Citation sources
TCGA92/S171(2)(cc) prevents the no gain/no loss rule applying to a disposal by or to a Venture Capital Trust. As with investment trusts, see above, this prevents a group taking advantage of the tax exempt status of a Venture Capital Trust under TCGA92/S100(1). Where there has been a no gain/no loss transfer under Section 171(1) to a company which was not a Venture Capital Trust at the time of the transfer, but it becomes a Venture Capital Trust from a time within six years of the transfer, see C
Part 6 Venture capital trusts Chapter 1 Introduction Venture capital trusts and VCT approvals 259 1 In this Part “ venture capital trust ” means a company which— a is not a close company, and b is for the time being approved for the purposes of this Part by the Commissioners for Her Majesty's Revenue and Customs (see Chapter 3), and “ VCT ” means a venture capital trust. 2 In this Part “ VCT approval ” means an approval of a company for the purposes of this Part.
Three reliefs are available to individuals subscribing for new ordinary VCT shares: ‘front-end’ income tax relief (VCM51020+), exemption from income tax on dividends (VCM51200), and exemption from CGT on disposals (VCM52000+). CGT deferral relief, previously available, was abolished in respect of shares issued after 5 April 2004 (VCM53000+). Two of those reliefs are available to individuals who acquire ordinary VCT shares other than by subscription, for example by purchasing them from someone el