Venture Capital Trusts Urge Chancellor to Reinstate Tax Break
Industry leaders warn of a significant reduction in funding for innovative firms if a key tax incentive is not restored.
Venture capital trusts (VCTs) are urging the Chancellor to reverse a reduction in a crucial tax break, warning that it could lead to a 20 to 40 percent decrease in funding for innovative and fast-growing companies.
VCTs, which collectively manage £6.6 billion and support approximately 1,100 firms, are a popular investment vehicle for individuals seeking tax relief. While the previous Chancellor, Rachel Reeves, increased the maximum investment allowed in a VCT to £200,000, she simultaneously reduced the income tax relief available to investors from 30 percent to 20 percent. This move has been described as "completely bonkers" by industry observers.
The trade body for VCTs has communicated to the current Chancellor, John Healey, that this policy change has "weakened investor confidence" and could "reduce fundraising and restrict capital for the fastest-growing" firms.
In a letter, the VCT Association highlighted that VCTs are instrumental in directing private capital towards high-growth companies that create skilled jobs, particularly outside of London and the South East, aligning with government plans for regional economic development. The association's findings indicate a significant negative impact on businesses: 62 percent of founders backed by VCTs now plan to scale back their growth plans, 45 percent anticipate job cuts, and a quarter are considering relocating their businesses abroad.
The Treasury has stated it does not comment on "rumour, speculation or proposals" regarding tax matters.