At GBI Magazine, we once again aimed to determine the industry’s thoughts on range of topics that are widely being discussed within the tax-efficient investment space.
Our previous poll series have consisted of a vast variety of industry-dominating topics such as the autumn budget, IHT regime on pensions, major impacts on tax-efficient investments, and more. This week, we have aimed to gather industry professionals’ thoughts and views on VCT reform, post-budget adjustments to CGT and pensions’ affect on investor sentiments toward VCT, and understanding the benefits and risks of VCT and EIS schemes.
Industry experts and professionals have shared their views on the factors mentioned.
1) The VCTA is proposing policy reforms to VCTS in terms of relaxing the requirements for company ages and limits on funding. Do you think these would be beneficial for the industry?
This year marks 30 years of VCTs, and with the news that the VCTA is proposing policy reforms to VCTS, we aimed to find out if industry professionals believe that these reforms are beneficial for the industry or not necessarily needed. The proposal intends to extend age limits for company eligibility from 7-10 years for most businesses and from 10-13 years for the knowledge-intensive companies. When analysing the results of our findings, it is clear that 60% of participants said they do find the reform to be beneficial. The remaining 40% stated that they do not believe that the changes to reforms are beneficial to the industry.
2) Have the post-budget adjustments to CGT and pensions affected investor sentiment towards VCT and EIS schemes?
In the 2024 Autumn Budget, the government announced that a legislation in finance bill will be introduced to increase the main rates of Capital Gains Tax from 10% and 20% to 18% and 24%, retrospectively. The change took place for disposals made on or after 30 October 2024. Within the budget, it was also announced that changes to pensions would be made, with effective abolition of the IHT exemption from 6 April 2027. Upon looking into the results of the question, 67% of participants voted that they do believe the adjustments have affected investor sentiment, with a much smaller percentage of 33% voting that they don’t actually believe that this has affected investor sentiment.
3) Do you think the benefits and risks of VCT and EIS schemes are understood widely enough by advisers?
With VCT and EIS schemes having a range of both benefits and risks, we aimed to find out whether industry professionals believe that these benefits and risks are understood widely enough by advisers. Both schemes posses an appealing range of benefits, such as being eligible for 30% income tax relief, but along with the positives come risks that must be considered. EIS schemes have a number of risks to take into account, such as capital being at risk, volatile investment opportunies in smaller companies, and tax relief not being guaranteed.
When asked if they believe the benefits and risks of VCT and EIS schemes are understood, a striking percentage of only 11% of industry professionals shared that they do believe the risks of VCT and EIS schemes are understood, with the huge margin of 89% voting no. There is no doubt that the majority of participants have little faith in the schemes being understood widely enough by advisers based on the findings of this research.
We would like to hugely thank all our industry professionals who took the time to take part in our latest poll. Be sure to keep an eye out for more opportunities to share your views!
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