The Association of Investment Companies (AIC) has backed the government’s decision to extend the venture capital trusts (VCT) scheme beyond 2025 in its report into the impact of VCTs on economic growth.
In chancellor Kwasi Kwarteng’s (pictured) mini budget, he announced that tax relief for VCTs would continue beyond 6 April 2025, removing the “sunset clause” that threatened to bring an end to the scheme.
Launched in 1995, it provides an upfront 30% income tax relief for VCT investors.
Richard Stone, chief executive of the AIC, said: “VCTs deliver a wide variety of benefits to the economy, entrepreneurs and investors, so we were delighted to hear the chancellor back the scheme in his mini budget. We’re looking forward to working with the Treasury to put the scheme on a permanent footing and remove any remaining uncertainty for investors and companies.
“Our new research sheds light on the impact VCTs have on growth, jobs, exports, innovation and regional development. Now in its 28th year, the scheme is an essential part of the UK’s funding ecosystem and has helped hundreds of companies grow and thrive.”
Among the key findings in the AIC report are that VCTs have made over 1,000 investments into 530 companies since 2018, the average sum is £1.6m, while 49% of investor cash flows into London-based firms.
Trevor Hope, CIO at Gresham House Ventures, said the extension is “positive”.
“This will provide long-term stability to VCTs, which currently contain over £6bn of capital and play an important role in supporting SMEs, bringing benefits in terms of employment and economic growth around the UK.”
There are 51 VCTs listed on the London Stock Exchange with total assets of £6.4bn.
According to the report, 51% of VCTs sell their goods and services abroad, compared to 10% of small and medium-sized businesses in the UK as a whole.
Alex Davies, CEO and founder of Wealth Club, said: “It is great to see the chancellor announcing the extension of the VCT and Enterprise Investment Schemes (EIS), especially after a year or so of speculation about whether a looming ‘sunset clause’ could see the industry shut down in April 2025. Removing this uncertainty should give investors the confidence to continue supporting this key engine of British innovation.
“After many years it feels like we have got a government on the side of business and entrepreneurs that understands the value they bring to the economy and society. The announcement today will bring much-needed money into early-stage businesses at a time we really need it.”
See also: Downing sells VCT business to Foresight for £17.8m