Investors like Venture Capital Trusts (VCT) because they offer incentives that minimise the tax they pay.
VCTs do not offer something for nothing, as the downside is investors have to keep their cash tied up for several years to win the tax breaks.
Now, investors are increasingly targeted by scammers with a get-rich-quick scheme they claim gets round the tax rules.
Several leading VCT scheme managers are warning investors that cold-callers offering to buy out their positions while letting them retain their tax incentives are scams.
The callers put an offer in for the investor’s VCT shares that more than covers the financial loss of tax incentives.
Upfront fees demanded
Taking investors to stage two of the con is where the fraudsters try to make their money.
Having won the investor’s confidence with the buy offer, they explain that to proceed, the investor needs to pay some upfront administration fees.
Fund managers are warning that trying to check out the scammer does not help.
“In many cases they set up a Skype number similar to a fund telephone number and have one of their own people manning the other end,” he said.
VCT investors approached with an offer to buy out their shares should contact the VCT fund manager who set up the deal – they may have a buy-back option but no third parties are involved.
Several fund managers are also warning about ‘boiler room’ operations posing as real funds trying to sell worthless shares to unwary investors.
Scams sound attractive
Octopus, a leading VCT, has a warning posted online, which says: “We would like to alert all shareholders in Octopus managed VCTs to the misuse of the Octopus name by third parties who claim to be connected to Octopus or our VCTs in some way.
“We have been made aware of cases where shareholders have been contacted by someone selling shares in companies which have little or no value, or may not even exist or offering to buy their shares at a higher price than their market value.
“These types of scams are targeted at existing shareholders and will sound like attractive offers. The caller will often ask you to pay something upfront, such as a bond or other form of security which they claim you’ll receive back if the sale doesn’t go through. They may also ask you to sign a form preventing you disclosing details of the offer.”
Scammers can find the names of shareholders that are publicly listed on company registers.