The Treasury Committee report on venture capital has called for an extension on sunset clauses.
Under the current system, both Enterprise Investment Schemes and Venture Capital Trusts have statutory sunset clauses that will cause their tax reliefs to expire in April 2025.
While the Government has signalled an intention to extend the schemes, it has not said when it will do so or for how long. The Treasury Committee said the uncertainty was “a risk to investment” and called on HM Treasury to detail and implement an extension urgently.
Under the current system, both Enterprise Investment Schemes and Venture Capital Trusts have statutory sunset clauses that will cause their tax reliefs to expire in April 2025. While the Government has signalled an intention to extend the schemes, it has not said when it will do so or for how long. The Treasury Committee said the uncertainty was “a risk to investment” and called on HM Treasury to detail and implement an extension urgently.
The Association of Investment Companies has welcomed the Treasury Committee report. Richard Stone, chief executive of the Association of Investment Companies, said: “We warmly welcome the Treasury Committee’s support for urgent action on the VCT sunset clause. We hope the Chancellor will take the first opportunity to restore certainty to the UK’s venture capital market by setting out clear plans to amend or abolish the clause in the upcoming Autumn Statement.”
The report finds that the VCT scheme is crucial to funding small, high-potential businesses in the UK and can be an “engine of economic modernisation and growth.” However, it also highlights the potential for the scheme to go further, for example by spreading investment more evenly across the UK’s regions, with current investment disproportionately allocated to London and the surrounding areas.
To achieve this, it sets out suggestions including revisiting the age limit on eligible VCT investments.
The report also calls for greater diversity in the sector, both in terms of the characteristics of business founders that receive venture capital funding and the people who make venture capital funding decisions, with women and ethnic minorities highly underrepresented in both groups.
Stone added: “It’s also clear that more needs to be done to ensure recipients of VCT funding are representative of the UK’s diverse population. It has been encouraging to see more female-led and ethnically diverse teams receiving funding to grow their businesses, but there is widespread acknowledgement that further work in this area is needed for the schemes to reach their full potential.”
