DTUK1610

19Money MattersJune 14-20, 2010United Kingdom Edition About the author A s a significant number of dentists earn more than £130,000 a year, or aspire to, which means they fall into the 50 per cent tax bracket, and so need as much information as possible to reduce their tax bills. In this article we’ll cover Venture Capital Trusts and En- terprise Investment Schemes as ways to save money. Venture Capital Trusts Venture Capital Trusts (VCTs) are similar to investment trusts and are often used as a way of reducing tax liabilities. They’re listed on the London Stock Ex- change, but invest in small, higher-risk trading companies who are not listed on a recog- nised stock exchange. VCTs employ less than 50 people and have no more than £7 million in assets; they can only receive £2 million in funding per annum. There are four varieties of trust: • AIM trusts invest only in companies whose shares are listed on the Alternative Investment Market • Specialist trusts focus on firms in specific industries, such as the technology sector or the music business • Private equity trusts take stakes only in unlisted companies • Generalist VCTs are free to invest in any type of qualifying company The risk aspect of companies in their early stages of develop- ment might not appeal, so a pop- ular alternative is VCTs. These focus on relatively large asset backing and so have potentially less risk. HM Revenue and Customs has a list of approved VCTs that may entitle you to various tax reliefs, but it is important to re- member that their approval is not a guarantee of the safety or success of the investments made. However, despite the risks, none of the VCTs launched since 1995 have gone under, although some launched around 2001 to buy into technology companies haven’t fared so well. An investor can get income tax relief at the rate of 30 per cent for a year if shares in VCTs subscribed to (up to a maximum of £200,000) be issued to you in the year, giving a maximum re- bate of £60,000. It is important to remember that this is a tax re- bate. If you sell within five years of buying, you must pay all the tax back. It’s also worth remem- bering that you are protected from capital gains tax whenever you sell; dividends and distribu- tions are tax-free. Enterprise Investment Scheme (EIS) Similar to VCTs, investors can gain attractive tax breaks from an EIS, as long as you’re pre- pared to make a long-term com- mitment and are aware there is still an element of risk involved. Even though there might be relief from income, capital gains and inheritance tax now, it is worth remembering that tax rules can and do change. There are a number of new schemes that take advantage of the 18 per cent rate of capital gains tax and those which invest in lower-risk companies than the usual EIS schemes. DT Reducing your tax bill With expert advice, dental professionals can ensure their tax burden is efficiently managed, says Tho- mas Dickson in part one of this two-part article Thomas Dick- son, director of Essential Money Limited, for- merly a partner of Money4Den- tists. For more i n f o r m a t i o n , and to receive a free copy of The Little Book of Money, packed full of practical hints and tips, contact Essential Money on 0121 685 5060 or email thomas@es- sentialmoney.co.uk.