"The government urgently needs to reconsider these changes. Our analysis shows that start-up and scale-up businesses could face a funding shortfall of well over £500 million, as a direct result of changes to VCT tax relief announced in the Budget. If the aim, as was claimed in the Budget, is to make Britain the best place to start and scale a business, this misguided policy risks achieving the opposite."
"There is a clear misunderstanding at the heart of this policy. VCTs and EIS are not competing sources of capital - they are complementary. While some investors use both, the overlap is limited. Among our own clients, only 19% invest in both VCTs and EIS."
"This is why the idea that EIS will simply fill the gap left by reduced VCT investment is flawed. The vast majority of investors cutting back on VCTs are not prepared to switch to EIS."
Wealth Club warns that changes to Venture Capital Trust (VCT) tax relief from April will sharply reduce VCT investment and create an estimated funding shortfall of about £550 million for UK start-ups and scale-ups in the first year. The firm’s post-Budget survey indicates only a small proportion of displaced capital will move into the Enterprise Investment Scheme (EIS). Survey responses showed 42% of investors would stop VCT investment, 44% would invest less, and just 13% would divert contributions into EIS. Wealth Club emphasizes that VCTs and EIS are complementary, with only 19% of its clients investing in both.
Read at London Business News | Londonlovesbusiness.com
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