The Association of Investment Companies (AIC) has called on Chancellor Rachel Reeves to take bold action in her upcoming Budget to foster an investment culture in the UK.
The AIC said this week that there are three areas they’d specifically highlight towards this goal, and these are ISA reform, a phased abolition of stamp duty and helping VCTs generate more growth.
Here on Tax-Efficient Investment, it’s the AIC’s thinking around VCTs that’s really caught our eye and that we’re highlighting in Richard Stone’s comments below.
As well as the detail below from the AIC, you can also find lots more pre-budget news and views that we’re running here on IFA Magazine today, in our special Friday Focus section.
Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said:
“The VCT scheme is a real UK success story, giving investors the opportunity to back ambitious British companies and helping those companies succeed.
“The government recognised the success of the scheme in one of its first acts after the general election – extending it until at least 2035. However, the scheme risks becoming less effective because the limits on the amounts VCTs can invest in companies have not been revised for over a decade. We have put forward proposals that would not cost the Chancellor a penny but would ensure VCTs can go on supporting companies to generate even more growth and jobs for the UK.”
Proposed changes to VCT investment rules
The AIC’s proposed changes to the VCT rules include increasing the annual investment limit from £5 million to £10 million for all VCT investee companies and from £10 million to £20 million for knowledge intensive companies (companies involved in groundbreaking innovations). The lifetime limits for VCT investee companies should be increased from £12 million to £20 million, and from £20 million to £30 million for knowledge intensive companies.
Currently VCTs cannot invest in businesses with assets of more than £15 million at the time of investment. The AIC proposes increasing this limit to £20 million for investee companies and £25 million for knowledge intensive companies. Finally, the ‘age limit’ on VCT investments should be abolished. Currently, an investee company must receive its first VCT investment no later than seven years after its first sale, rising to ten years for knowledge-intensive companies.
