According to an article by Rebecca Clancy in today’s Investment Adviser magazine, ”The multi-billion pound venture capital trust (VCT) industry was reeling last week after it emerged chancellor George Osborne had made an off the cuff remark suggesting the VCT format could be scrapped in the next Budget.” Aparently Mr Osborne said there were “question marks” over the future of VCTs at a Forum for Private Business event in his Tatton constituency. He questioned whether VCTs are real venture capital investments or simply tax loopholes. 

Rebecca Clancy reported that HMRC was also unable to confirm Mr Osborne’s stance on VCTs. She also said that a Treasury spokeswoman described the remarks as “off the cuff” but refused to state whether the VCT format would survive the March 23 Budget. 

The VCT market had expected to be strong this year as smaller companies have historically lead the way out of recession in the UK. Then there is the Government’s emphasis upon growth in the economy and the Prime Minister’s statements in Wales last week in which he recognised the big part that smaller companies would play in this. On top of that there is an increasing number of high earners who, from 6 April, will find that their pension contributions are capped at a very much lower level than they are currently – 80% lower in the most extreme case – a number of whom would be expected to start to see the benefits of using VCTs with their 30% tax relief as a useful top-up to their restricted pension contributions.

This may be a false alarm and the Association for Investment Companies (AIC) will no doubt be lobying hard for their members in the remaining days before the Budget. However, if you are thinking of investing in a VCT at some time over the next few months, now might be the prudent time to do this. 

If you would like to know more about VCTs you can download our Guide: Venture Capital Trusts from our website at www.arch-fp.co.uk/venture_capital_trusts.php.

If you would like to discuss any issue that has been raised by the Arch Blogg please ask your usual Arch adviser, telephone 01483 204600 or email enquiries@arch-fp.co.uk.