VCTs vs EIS: What’s The Difference?


Making investments in different projects and firms is also a great form of making huge profit returns in the business world. In this respect, there are two most popular options available to the investors that may surely prove to be quite lucrative for them.

These include VCT and EIS. VCT is basically a form of equity or you can say a form of financing that is provided by the investors to small companies, firms or businesses. For investment purposes, such businesses are chosen that are known to have great growth potential in the long run. Here, investors may be in the form of well-established companies, banking institutions and so on.

Likewise, the EIS or Enterprise Investment Scheme is meant for the smaller companies that are at high risk. It is a great way for them to increase their capital. In this case, the investors get federal tax relief which is indirectly a form of incentive for them. By offering tax relief, the smaller companies are successful in attracting the investors to make investments. Though both VCT and EIS are meant to provide financing to smaller companies or the start-ups however there are some essential differences amidst the two as explained below:-

Difference In Holding Period 

As far as making investment in EIS shares and VCTs is concerned, there is a difference in the holding period of the two. The minimum holding period for getting tax relief in case of VCT is five years which is three years in case of EIS.

Difference In Maximum Amount Of Investment 

There is a great difference in the maximum investments that can be made in VCT and EIS. Also the investments can be increased in case of EIS.

Difference In Tax-Free Dividends

In case of VCTs, the investors are paid tax-free dividends. Contrary to this, the dividends in case of EIS are taxable. Thus the investors need to choose the best suited option that may offer them maximum benefits after tax relief.

Difference In Funding Or Investments 

As far as funding for VCT is concerned, it is delivered in the form of fund structure. On the other hand, it is mandatory for the investors to hold individual company shares in case of EIS investments.

Difference In Inheritance Tax Mitigation 

It is also a great way by which EIS and VCT differ from one another. The investments made in EIS shares are eligible for inheritance tax mitigation. It means such investments are automatically eligible for Business relief. In contrast to this, the VCT investments are not eligible for business relief or you can say inheritance tax mitigation.

After coming to know about all such differences amidst EIS and VCT, you may choose the most appealing option so as to make investment and get great profit returns in future.