VAT exemption on VCT fees will save sector '£10 million a year'

Alistair Darling surprised and delighted the venture capitalist trust (VCT) industry by extending VAT exemption to cover the management charges on VCTs for the first time from 1 October.

From that date both investment trusts and venture capital trusts will pay no VAT on fees for the first time, bringing them in line with open ended funds.

The move is expected to save the VCT sector around £10 million a year.

Following lobbying from JPMorgan Claverhouse Investment Trust and the Association of Investment Companies (AIC),  the Government had indicated  that investment trusts would be exempt from VAT on management fees after the European Court of Justice ruled in their favour last June.

However, VCTs were not included in the announcement.

The AIC's deputy director general Ian Sayers estimated the change of rules will save the VCT industry around £10 million a year, compared to the investment trust industry's estimated £40 million saving from the change of VAT rules.

He said: 'We are delighted that VCTs have been made exempt. We were hopeful that we would get an announcement this year but were not expecting VCTs to be included in this particular budget pack. Because the VCT industry is smaller than the investment trust  industry it will feel a greater benefit.'

'As they are only invested in the UK they will save 100% of VAT going forward.'