Following the autumn statement, which revealed the government’s plans to extend the VCT and EIS sunset clauses until 2035, experts have been sharing their reactions to this news.
Christiana Stewart-Lockhart, Director General of the EISA, said:
“The extension of the EIS is excellent news for early stage business growth in the UK. Entrepreneurs are now able to seek much needed investment with the confidence that the EIS will still be available to support their future growth beyond April 2025. The current economic climate has definitely been a challenge for many entrepreneurs and this announcement about the EIS will provide some much needed reassurance for entrepreneurs and investors across the UK.
Today’s announcement is fantastic news for start-ups in all regions and devolved nations. This is a world leading scheme. It’s success in fostering innovation and entrepreneurship, as well as economic growth, has been internationally recognised and it’s great to see the Government backing British businesses in this way. The Government’s emphasis on the importance of entrepreneurship in our economic recovery is very welcome.
Nicholas Hyett, Investment Manager at Wealth Club, said;
“The announcement that the government is extending the VCT and EIS sunset clauses out to 2035 is good news for two schemes that have supported billions of pounds worth of investment into UK start-ups. It removes uncertainty that has been lingering over the sector for some time, potentially putting off new entrants and new investors, and secures a crucial source of funding for the UK’s blossoming start-up scene.
It is a shame that the sunset clause hasn’t been abolished altogether – which would have avoided a repeat of the current uncertainty in a decade’s time – but with the Labour Party also voicing support or the schemes the extension is welcome nonetheless.”
Rupert West, Managing Director, Puma Private Equity, said:
“We are delighted that in today’s Autumn Statement, the Chancellor has confirmed the Venture Capital Trust sunset clause has been extended to 2035. The VCT scheme provides crucial funding to British scale-up, high potential businesses and this news will provide much needed clarity both for those companies looking to grow and for investors considering investing this tax year.
“There continues to be huge demand for VCT investing, in the 2022/23 tax year, VCT fundraising surpassed the £1 billion milestone for the second time (£1.08 billion, according to the Association of Investment Companies). The scale-up companies that the scheme supports are the lifeblood of the UK economy and the VCT scheme enables them to grow, innovate and create vital employment opportunities. Today’s announcement means that investors can continue to use VCTs with confidence, and gain exposure to the growth of these innovative companies.”
Ian Zant-Boer, Chief Executive Officer at the private equity firm Growthdeck, said:
“We’re delighted that the EIS will be extended to 2035. That gives investors in EIS the kind of certainty that they need. EIS is one of the main ways of getting early-stage equity investment into smaller businesses in the UK. A total of £18.2billion has been raised through EIS over the last decade.”
“With the cost of borrowing for small businesses having spiralled over the last two years, the availability of equity investment for SMEs has become more important than ever. Traditional PE firms have largely steered clear of this part of the market to focus on much bigger deals. EIS has proved itself essential in filling this gap in the market.”
“EIS is still quite a heavily-restricted system that could do much more to grow the economy if some of the red tape were cut. We’d love to see the Government simplify the scheme – too many businesses are locked out unnecessarily.”
Jason Hollands, Managing Director of investment platform Bestinvest, said:
“It is welcome news that the Government have finally confirmed today that they will legislate to extend the ‘sunset clause’ for Venture Capital Trusts and Enterprise Investment Schemes from April 2025 to April 2035. The ‘sunset clause’ was required under EU state-aid directives and so one option could have been to make these schemes permanent as a demonstrable example of the greater flexibility the UK now has outside of the EU regulatory orbit. But an extension by a decade nevertheless provides both businesses and VCT and EIS fund managers with clarity that the schemes remain a valued part of the financial ecosystem.
“However, given the Government’s drive to encourage greater capital for UK fledgling companies, they have also missed an opportunity to go further and give a shot-in-the-arm to these schemes. The annual amount that can be subscribed to VCT share issues and benefit from income tax credits has been stuck at £200k since 2004/5 and is well overdue an increase after 20years.
“A bolder move would have been to increase the income tax credits for investing in VCT new shares from 30% to 40% – a level they were at in 2005/6. It is noteworthy that when the VCT income tax credit was reduced from 40% to 30% the amount of VCT fund raising dropped from £779 million in 2005/6 to £267 million the following year. Increasing it could have provided a very rapid boost to the financing of small, UK-growth companies, especially from high earners who still have very limited access to pension tax reliefs because of tapering.“
Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said:
“It’s excellent news that the Chancellor has committed to extending VCTs’ sunset clause to 2035. This addresses an urgent issue as the sunset clause would have automatically ended VCT tax relief in April 2025. The extension to 2035 will help provide certainty to investors and businesses and enable VCTs to continue supporting UK growth companies.
“VCTs play a vital role in providing funding and support to small, ambitious UK businesses, a key driver of economic growth. The AIC will continue to work with the government as the legislation passes through parliament and we hope this measure will unlock further investment.”
Luke Barnett, head of tax advantaged investments at St. James’s Place, said:
“It is welcome news that the EIS and VCT schemes have been extended. Not only is the announcement a recognition by Government of the benefits which these schemes can bring, but it will also provide much needed certainty to investors. With this news, it will help to reinforce the attractiveness of the UK market for startups, and founders can continue to build new and exciting businesses with confidence.”
Seb Wallace, Investment Director at Triple Point Ventures, said:
“It is great to see the Government are finally placing into law a critical extension of the VCT and EIS schemes, extending the schemes until 2035. These tax reliefs are vital for supporting our early-stage tech sector and enable the UK to set the foundations for brilliant later stage businesses that will compete on the global stage.”
Katerina Heal, Partner at Marriott Harrison, said:
“Our business clients and investors will welcome the EIS and VCT schemes being extended to 2035. With the recent increase in SEIS investment allowance, this important tax relief regime saw over 4,000 companies raise over £2.3 billion in 2021-22.”
Kerry Baldwin, Managing Partner, IQ Capital, said:
“Very pleased to see the government extend the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) to 2035 in response to input from founders and investors. These schemes play a vital role in unlocking capital for deeptech founders and early stage businesses across the UK.”
Axe Ali, EMEIA Financial Services Private Equity & Venture Capital Leader, said:
“Today’s Statement highlights the government’s clear intent to boost growth in new and innovative UK companies. Establishing a Growth Fund within the British Business Bank will help to drive investment in domestic growth assets, and should fuel a stronger pipeline of companies starting, growing and listing within the UK.
“Following the launch of the Mansion House Compact and the Mansion House Pensions Summit, which were supported by EY, the government is very clearly looking to future-proof investment in non-listed UK assets with the Venture Capital Fellowship. This will support long-term investment in UK companies through a growing cohort of venture capital investors in the UK.”
Jack Rose, Head of Retail Sales at Triple Point, said:
“We warmly welcome the UK Government’s decision to extend the Venture Capital Trust (VCT) and Enterprise Investment Scheme (EIS) sunset clause, announced within the Autumn Statement today. This extension is a testament to the government’s commitment to nurturing the growth of young, fast-growing SMEs, which serve as the backbone of the UK economy.
“The tax incentives embedded in VCT and EIS have proven to be magnets for investors, attracting over £1 billion in VCT investment for the second consecutive year, in the 2022/23 tax year. Simultaneously, EIS saw an impressive investment of over £2.5 billion by UK taxpayers during the same period. These figures underscore the vital role these pieces of legislation play in providing crucial resources to young companies and the investors who believe in their potential.
“Over nearly three decades, companies backed with VCT and EIS capital have not only created thousands of jobs across the UK but have also paved the way for several to become unicorn tech success stories. This success speaks to the effectiveness of the model the UK has established for early-stage companies, positioning us at the forefront of early-stage company investment in Europe.
“The extension of the VCT and EIS sunset clause ensures the continuation of a proven framework that fosters innovation, fuels job creation, and facilitates the emergence of groundbreaking technologies.”
David Ovens, Joint Managing Director, Archangels said:
“Archangels welcomes the initiatives announced today which will unlock further funding into innovation and high growth technology and life science businesses. However, there are two measures in particular which are welcome news for both early-stage investors and scale-ups. Firstly, the merger of the R&D tax credit regimes provides some simplification to the tax regimes of R&D intensive, innovation-focused businesses.
“We’re also pleased to see a 10 year extension of the sunset clause for the Enterprise Investment Scheme (EIS) to 2035. While we’d also have liked to see an increase in the investment limits, the clause extension at least provides some longer term reassurance to investors in early-stage businesses.”
Andrew Dixon, Head of Wealth Planning, at SG Kleinwort Hambros, said:
“The Chancellor’s recent announcement of the massive pensions shake-up sounds good in theory. In practice, this can be difficult to get off the ground due to the legacy of pension system and complexity for employers. It is also difficult to see the benefit of both the pension dashboard and a pension for life as they are both aiming to solve the same issue.
“However, innovation is welcomed in the sector, to ensure that tomorrow’s pensioners will be able to make the most of their well-deserved lifetime earnings. Whether people are planning for a comfortable retirement or helping out family, it is important they are being offered the right tools to achieve that.
“Pleased to see the establishment of investment vehicles to channel pension funds into start-up companies. As a passionate supporter of the venture space in the UK, it is pleasing to see the Government focusing on innovation, and from a personal finance perspective, extending the sunset clause on Venture Capital Trusts and Enterprise Investment Schemes.”
Trevor Hope, CIO at Gresham House Ventures and manager of the Mobeus VCTs and Baronsmead VCTs, said:
“Chancellor of the Exchequer Jeremy Hunt’s ten-year extension of the sunset clauses for VCTs and EISs is a recognition of the importance of these schemes to British innovation and will be welcomed by investors and business owners alike. The VCT industry’s strength remains its core value proposition: the opportunity to support home-grown British innovation, diversify investment portfolios, with the potential for substantial returns. This is supported by generous tax reliefs where suitable investors benefit from 30% tax relief on their initial investment and tax-free dividends when received.
“As we prepare our Baronsmead VCTs to launch, next month, a £30m fundraise with an over-allotment option of £20m, today’s announcement reaffirms our confidence that these unique vehicles will continue to play a pivotal role in fuelling UK innovation and providing investors with the opportunity for long term positive returns.”
Moray Wright, Parkwalk CEO said:
“I’m really delighted to see Chancellor Jeremy Hunt announce in today’s Autumn Statement that the government is extending the VCT and EIS sunset clauses out to 2035, and will legislate in the Autumn Finance Bill 2023 – fantastic news for UK start-ups and spin-outs, many of whom would not be in existence without this world-leading scheme.
“For 30 years, the EIS has been a boon for early-stage companies, helping drive billions of pounds worth of investment into UK innovations. The extension gives investors and UK spinouts and start-ups the certainty we’ve been needing. We look forward to ensuring many more early-stage companies benefit from this scheme over the coming years.
“The Chancellor also rightly restated the UK’s ambition to be the best place to start, grow and scale technology and science companies that will be the growth engine of the 21st century – and here at Parkwalk, we’re proud to be making this a reality.
“Great work by HMRC, HMT and various Ministers to get this finalised in time!”
