VCT universe set to expand

While the raising of the rate of income tax relief from 20% to 30% on Enterprise Investment Scheme (EIS) subscriptions made it into the Chancellor's Budget speech, changes which will also impact Venture Capital Trusts (VCTs) were buried in the supporting documentation.

In particular, both the EIS and VCTs will see an increase in their universe of potential investee companies to those with up to 250 employees (from 50 full-time employees) and gross assets of £15 million (from £7 million). Additionally, individual companies may now receive up to £10 million of VCT financing in a year - a sharp increase from the £2 million allowed under previous rules.

The quid pro quo is that the Government plan to ‘refocus' these schemes on genuine risk capital investments.

Jason Hollands, Head of Corporate Affairs at F&C Investments, said: "With the highest rate of income tax now 50%, interest in schemes which attract income tax relief has grown and there are a number of VCTs currently raising money. The changes in the Budget partially reverse some of the ill-timed restrictions put in place by the previous Government ahead of the credit crisis. The changes will enable VCT managers to do more substantial deals on bigger businesses than available at the moment, widening the universe of potential investments. This is welcome news for investors."