The Association of Investment Companies (AIC) has written to the Business and Trade Committee following the publication of its report, ‘Investing in the UK economy’.
The report recognises that since their inception in 1995, “VCTs have proved an important way of mobilising funds for qualifying new ventures”.
The evidence for the report was gathered before the government announced the cut in VCT upfront income tax relief from 30% to 20%. The AIC recommends that the Committee investigates the implications of the tax cut and expected lower fundraising for the UK’s scale-up companies.
“We welcome the Committee’s excellent report which supports VCTs’ vital role in funding the UK’s most ambitious businesses. The Committee proposes that the government sets a ten-year goal of tripling the size of the UK venture capital industry. But this commendable ambition has been undermined by the cut in VCT tax relief which is expected to lead to a big drop in fundraising for investment into growing businesses.
“The government should be asked to explain how it expects the cut in tax relief to affect VCT fundraising and what this means for the flow of capital to ambitious scale-up companies. Sadly, the likely outcome will be a greater shortfall in the scale-up capital available to companies, meaning less innovation, lower growth and fewer jobs created. The Committee can make a valuable contribution by examining the government’s position and urging action to restore the relief to maximise VCTs’ positive impact on the UK economy.”
Richard Stone, Chief Executive of the Association of Investment Companies (AIC)
