The government needs to send an “early signal” to the venture capital trust industry that the tax breaks will be extended beyond 2025, the industry body has said.

In its response to a Treasury select committee inquiry, the Venture Capital Trust Association said VCTs played a “vital role” in the UK funding ecosystem, and the scheme was working exceptionally well.

However, chair of the public policy committee at the VCTA, Will Fraser-Allen, urged the government to ensure investors can continue to benefit from the tax breaks awarded to them beyond 2025.

VCTs invest in higher risk unquoted companies and come with a 30 per cent tax relief if the investments are held for five years, with any dividends earned also tax free.

But a sunset clause created as part of European Union state aid rules means VCT relief is only available to subscribers in the VCT for shares issued before April 6, 2025.

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