MoneyTalk (July 2004 Second Issue)

by Arch Financial Planning Limited

ROYAL ASSENT GIVEN TO FINANCE ACT 2004

On 22 July 2004 the proposals in the Finance Bill 2004 became law with few changes. This has great implications for the future of pensions in the UK as outlined in our last issue of MoneyTalk. Another area where no changes were made to the proposals is that of Venture Capital Trusts (VCTs).

Many more long term investors should consider investing in VCTs during this and the next tax years. The importance of ISAs as part of a long term investors 'tool kit' is being reduced. It is particularly frustrating that the Government is doing this at a time when the general indebtedness of individuals is at an all time high and continuing to increase as a result of the fact that debt is so readily available.

After 5 April 2006 the annual investment limit to a Maxi ISA falls from £7,000 to £5,000 of which not more than £1,000 will be able to go into a Cash ISA.

Compare this with the new tax benefits of VCTs:

• Income tax relief at 40% for the tax years 2004/05 and 2005/06 in the year of subscription, on investments in new VCT issues up to £200,000. The investor needs an income tax liability to utilise some, or all, of this relief.
• Tax Free Capital Growth. Private investors will not be liable to capital gains tax on any gains arising from the disposal of their VCT shares provided they were purchased within the £200,000 annual limit.
• Dividends paid by a VCT are free of income tax in the hands of the investor. Unlike an ordinary investment trust, capital gains may be distributed by way of dividends to investors.

You can invest as little as £3,000 in a VCT. For further details, or to print-off a copy of our new Fact Sheet, please visit our website www.arch-fp.co.uk/venture_capital_trusts.htm.

You will also find information on the current VCT offers on www.arch-fp.co.uk/special_offers_-_venture_capital_trusts.htm

Please let us know if you would like to discuss whether an investment in a venture capital trust might be appropriate for you. If you already have an Arch adviser then please contact him or her, otherwise email direct@arch-fp.co.uk or telephone 01483 204600.

Risk Factors

Past performance is no guarantee of future returns. An investment into a VCT is intended as a long-term investment. The value of shares in a VCT and the income from them may fall as well as rise and investors may not get back the amount originally invested. The price at which the shares in a VCT are traded may not reflect the net asset value of the Fund. The value of tax savings and eligibility to invest in a VCT will depend on individual circumstances.

These notes are intended as a guide only and do not replace the full prospectus that accompanies each VCT recommendation. The Risk Factors of Venture Capital Trusts are detailed on our website and the printer friendly fact sheet.

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Arch Financial Planning Limited

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