In a recent policy paper, the association underscored the vital role that Venture Capital Trusts (VCTs) play in the UK economy — a point reinforced by the extension of the sunset clause to April 2035. However, it also identified several key concerns for the Treasury to address.
The VCTA called on Chancellor Rachel Reeves to increase VCT investment limits, warning that inflation has significantly eroded their real value — nearly halving since 2016, according to the paper.
At present, lifetime investment limits for VCT-backed companies are set at £12 million (£20 million for knowledge-intensive businesses), with annual limits of £5 million and £12 million, respectively.
These limits have remained static since 2016, and the VCTA has cautioned that failing to adjust them for inflation will significantly diminish VCTs’ investment capacity.
The association is urging the Treasury to raise the lifetime caps to £30 million — and £40 million for knowledge-intensive companies — along with increasing annual limits to £15 million and £25 million, respectively.
“As a general principle, we believe all monetary thresholds within the VCT scheme should be reviewed every three years. Where inflation has reduced the scheme’s effectiveness, these limits should be adjusted accordingly,” the VCTA stated in its policy paper.
