VCTs raise £570 million – up 28% in a year

Publications that covered this story include City AM on 19 October, and Accountancy Age on 20 October.
  • But rumours swirl of a Budget Day crackdown on VCTs
  • VCTs vital in funding SMEs – following drought in bank lending

The amount of funds raised by Venture Capital trusts (VCTs) hit £570 million in 2016-17, up 28% from £445 million the year before.

With rumours of a Budget Day crackdown on VCTs, the latest statistics show the amount raised is the highest in over ten years, and is up 75% in the past five years, from just £325 million in 2011-12.

In 2016-17, 38 Venture Capital trusts (VCTs) raised on average £15 million in funds in the last twelve months.

The forthcoming Autumn Budget in November is widely expected to amend the rules regarding what assets VCT’s can invest in.

The Government has already published “Financing Growth in Innovative firms” which expressed concern that ‘capital preservation’ is at the heart of a large number of VCT investments.

Investors in VCTs currently receive a 30% upfront tax break if they hold shares for five years.

Andrew Snowdon, head of corporate tax in our London office, comments: “VCTs remain a vital and important source of funding for many small businesses, particularly with the current famine in bank lending to SMEs.”

“VCT’s are a great British success story. We know that the Chancellor is currently engaged in an ongoing review of capital markets, looking at whether various tax reliefs are well targeted and deliver value for money. However, he should remember what an important industry VCTs are. They are a valuable source of funding for small businesses and, with diminished capacity in pension contributions, as a profitable asset class for investors.”