VCT investment via II nominee

[AndrewInDevon]

I am going to invest in a VCT in the current tax year, executing the deal through Interactive Investor, which holds all my investments.

II have given me the option of using their nominee CREST service so that the investment is credited to my investment account with II.

I like the idea of seeing/managing all my investments in a single place, so my inclination is to go through the nominee route.

Are there any downsides?

[wanderer]

If you are hoping to get tax relief on the investment, it is no good buying it from ii or any broker. You need to buy it from a new issue from the vct, get a paper certificate and then - if you want to see it alongside all your other investments - deposit the certificate as a nominee with ii once received.

Obviously, if you don't want the tax relief then investing in aftermarket shares via ii might be fine for your circumstances

[Seasider]

You might get more answers/help if you posted this on the VCT board.

I have seen application forms for VCT subscriptions give a space for putting the shares into CREST but I have not done it myself. I assume you will still get the Income Tax Relief Certificate, which is separate from the share certificate, sent to you in case the Revenue ask to see it.

If you are subscribing through a broker you may want to see what the charges are for using them and then compare them with subscribing direct yourself or using someone like Wealthclub to do it. If it is cheaper, you can always do it direct or use Wealthclub, get the paper certificates and then lodge them with your broker if you want your investments all in one place. One thing you might look for is the thread on the VCT board about selling VCT investments. That mentions some places which are good places to lodge VCTs when you are trying to sell them eg into a VCT buyback programme. I can't remember if ii gets a mention.

Oh and unless you are lucky your VCT investment will show up in your summary table of investments with red ink next to it for a loss (maybe even a significant one). I find that paper certificates save me from seeing that every time I check online to see how I am doing.

[AndrewInDevon]

Opps, I didn't see the VCT Board!

Interactive Investor offer a 40% discount on the initial charge (ie it will be 3% rather than 5% that the VCT normally charges - its British Smaller Companies VCT plc) but ii also charge a £30 admin fee. So financially it makes sense to go through ii.

In order to invest in a VCT ii make you complete a compliance form to make sure your compos mentis (covering their own back in terms of mis-selling etc). I did that a few months ago, they don't charge for it, it just enables you to invest in more complex instruments.

You actually deal with the VCT direct (or more specifically their agent), so ii send you a VCT application form which is identical to the one on the VCTs own website, except its partly completed with ii as the financial intermediary. You then send the application form and cash to the VCTs agent, not ii. So the VCT will allocate the shares and tax certificate to me.

The only issue is...do I have the allotted shares registered in my name or, optionally, via an ii nominee (this option is on the VCT application form, and ii provide the details on how to complete this if its something I want to do), its entirely my option and ii offer the option neutrally.

I've opted to use the ii nominee route.

I've given VCT investment a lot of thought. My cynical instinct that the high fees charged (initial, performance + on-going) are used to mine the generous initial tax advantages investors get. On the other hand I'd expect fund managers to perform a huge amount of due diligence on their investments and I'd want them to be financially incentivised to help them perform. So I have rationalised the high fees in my head!

British Smaller Companies appear to have a decent recent performance record, not that's a guide to the future of course. I noticed that Best Invest have ranked this particular VCT offering with their highest 3-stars (no other current offer has this on their website). So that's some small comfort.

I like the idea of investing in small post start-ups, albeit that carries a lot of risk. Combine that with the fact that this tax year my tax position is unusually large, I've decided to give it a go with 7% of my total portfolio (funded by disposal of 3i shares which has been an amazing performer but has essentially become a Dutch supermarket!)

[Seasider]

Opps, I didn't see the VCT Board!

Interactive Investor offer a 40% discount on the initial charge (ie it will be 3% rather than 5% that the VCT normally charges - its British Smaller Companies VCT plc) but ii also charge a £30 admin fee. So financially it makes sense to go through ii.

Worth having a read of some old posts on the VCT board. For example this one on performance suggests you may be picking well with BSC (based on recent past performance) viewtopic.php?f=25&t=40663

The initial charge at ii seems to be the same as at Wealthclub although WC don't charge an admin fee and they also make a payment out of trail commission of 0.1% for 3 years (I think). Of course those figures may not be significant and it may be too late now anyway as it sounds as if you have already applied.

In my day 3i were big in private equity so a good base for VCT investing.

Have you thought about how long you want to hold the VCT? If you are thinking of selling after the five years are up you might want to look at this thread viewtopic.php?f=25&t=40605

Good luck

[scotia]

Opps, I didn't see the VCT Board!
British Smaller Companies appear to have a decent recent performance record, not that's a guide to the future of course. I noticed that Best Invest have ranked this particular VCT offering with their highest 3-stars (no other current offer has this on their website). So that's some small comfort.

Welcome to the world of VCTs. I started VCT investment in 2005, and they performed well, but I'm now winding down my VCTs, as a move to simplifying my financial affairs as I grow older (79). I still hold onto some British Smaller Cos shares - and they have done rather well. But rules, owners and fashions change in VCTs - and a number of yesterday's favourites have lost a lot of their gloss. So here's hoping your British Smaller Cos shares continue with their impressive performance.