In its response to HM Treasury’s consultation Financing Growth in Innovative Firms, The Association of Investment Companies (AIC) says it has demonstrated how VCTs are an ideal means to raise much needed capital from retail investors to help smaller businesses grow. What’s more, it has also proposed measures to ensure VCT and EIS investment is focussed even more closely on young, innovative businesses. Key amongst these, it says, are a restriction on allowing VCT and EIS money to be used to purchase property.
Chief Executive of the Association of Investment Companies (AIC) Ian Sayers said: “Since 2015, when the rules for VCTs were last changed, VCTs have been investing in just the type of young, innovative businesses that the Government believes should be supported by tax-incentivised investment. This investment promotes economic growth, with jobs in investee businesses more than doubling after VCT investment, as well as boosting tax receipts which offset the cost of the tax reliefs.
“VCTs also do not automatically return capital to investors on the disposal of a successful investment, but often reinvest this money in new businesses with no further upfront tax relief. However, without the initial upfront relief, much of this vital investment would simply not have happened.
“VCTs therefore already offer excellent value for money to the Treasury but, as the largest investor in the scheme through its generous tax reliefs, it is only right that Government should consider ways to make the scheme as effective and efficient as possible. Our proposal to end all investment to purchase property, and the other measures in our paper, will ensure that future VCT investment will be focussed on supporting the development of groundbreaking technologies.”