Small Growing Companies

By Stephen Lansdown | 01 Feb, 2008 

I met with a fund manager yesterday who specialises in investing in small companies. He loves the buzz of getting into a company before it becomes big and wants to feel that he is participating in those early stages of growth. Prior to a company selling up or floating on the stock market is often the period when the best gains can be made but also when the risk of failure is at it’s greatest so it is an exciting time.

For the private investor who wants to add a bit of spice to their portfolio there are some excellent tax concessions for those who are willing to take a risk of selecting a small company by investing into a company which qualifies under the Enterprise Investment Scheme. However for those who are happy to speculate but want a spread of risk and a professional manager to make the stock selection for them, a Venture Capital Trust is more likely to be of interest.

A maximum of £200,000 per tax payer can be invested in any tax year into one or more Venture Capital Trusts. On the basis that you pay the tax in the first place you will be eligible for a 30% tax relief on your investment and any income and capital gains made from the trust will be tax free in your hands as long as you hold the investment for a five year period. With the 5th April approaching there will be a number of Venture Capital Trusts available and of course if you straddle your investment between this tax year and the next you can invest up to £400,000 in a short period of time.

Venture Capital Trusts are by their very nature higher risk but offer the opportunity to enjoy the buzz of investing in the smaller companies like the fund manager I refer to above. For further details request our guide by calling our helpdesk on 0117 900 9000.