This Friday (29 November) marks 30 years since the introduction of the VCT (Venture Capital Trust) scheme by then-Chancellor of the Exchequer, Ken Clarke, as part of the 1994 Budget. To commemorate this milestone, the Association of Investment Companies (AIC) has released a report titled ‘Giving Great Companies a Flying Start.’ The report underscores the pivotal role VCTs play in supporting high-growth businesses, offering financing, business expertise, and ongoing guidance to help entrepreneurs realize their visions. It also highlights the broader contributions of VCTs to the UK’s economic growth.
VCTs are designed to back high-risk businesses with a significant chance of failure. To encourage investment in these ventures, the scheme allows investors to offset up to 30% of their investment in new VCT shares against their income tax liability. For instance, a £10,000 investment could provide an investor with £3,000 in income tax relief, along with tax-free income and capital growth benefits.
These incentives have been instrumental in attracting investors. According to AIC data, VCTs raised £882 million in the last tax year, making it the third-highest fundraising year on record. This follows record-breaking figures of £1.13 billion in 2021/22 and £1.08 billion in 2022/23, demonstrating significant growth compared to the £160 million raised in 1995/96 when VCTs were first launched.