Bank debt used

Bank debt used

British Smaller Companies VCT has become the first venture capital trust to take on bank debt in an effort to boost the funds under its management and spread investment risks.

The trust said it would raise a further #10.55m, on top of the #8.2m already invested, and #3.75m of the total would be drawn from a commercial bank credit line.

Phil Cammerman, MD of Yorkshire Fund Managers which manages VCT’s portfolio, said: ‘Leveraging will significantly enhance the resources available for investment. For a gross investment of #1 – which will be 80p after income tax relief – investors will actually have #1.25 invested on their behalf, once the fund is topped up by funds from the bank.’

He expects to use the extra funds to spread the portfolio in established companies with a turnover below #2.5m, leading to a cut in the risk of failure.

VCTs have found it difficult to raise funds from investors since Chancellor Kenneth Clarke launched the scheme in 1995. But by March, according to a Coopers & Lybrand survey, trusts will have raised #500m.

Coopers tax partner David Cartwright said the plan to take on bank debt would benefit VCT shareholders ‘as long as the investments pay more than the bank interest’.

Cartwright’s review showed a total of 225 investments have been made in 152 companies, with an average VCT investment of #495,000.

Related Articles

Supreme Court rules against Pimlico Plumbers in landmark employment case

Legal Supreme Court rules against Pimlico Plumbers in landmark employment case

1m Alia Shoaib, Reporter
Inheritance tax is 'unfit for modern society' and should be abolished, says think tank

Personal Tax Inheritance tax is 'unfit for modern society' and should be abolished, says think tank

3m Alia Shoaib, Reporter
Rent-a-room relief – the survey says…

Personal Tax Rent-a-room relief – the survey says…

4m Helen Thornley, ATT Technical Officer
What should the OTS prioritise in its review of inheritance tax?

Personal Tax What should the OTS prioritise in its review of inheritance tax?

6m Alia Shoaib, Reporter
LITRG urges government to consider tax changes in disability work plan

Administration LITRG urges government to consider tax changes in disability work plan

7m Lucy Skoulding, Reporter
HMRC appeal rejected in Tottenham Hotspur case

Administration HMRC appeal rejected in Tottenham Hotspur case

8m Emma Smith, Managing Editor
HMRC urged to clarify impact of income allowances on Self-Assessments

Personal Tax HMRC urged to clarify impact of income allowances on Self-Assessments

9m Alia Shoaib, Reporter
New trading allowance: simplicity, but not as we know it

Administration New trading allowance: simplicity, but not as we know it

9m Emma Rawson, ATT Technical Officer