With the raft of measures introduced in today’s budget, tax-efficient investors have been expressing some relief to hear the Chancellor retain her commitment to schemes such as EIS and VCTs.
Chris Lewis, Chair of the VCT Association, commented following today’s budget: “Today’s Budget underscores the Government’s commitment to sustained economic growth. Venture Capital Trusts (VCTs) will continue to play a crucial role in delivering this through supporting high-growth businesses and providing essential funding to scale-up companies across the UK, and we welcome the Chancellor’s reiteration of the Government’s commitment to extend the scheme for another 10 years. With over 1,000 businesses currently benefiting from VCT funding, the sector significantly contributes to job creation and innovation.
Given the tax changes announced today, the benefits of VCTs for both investors and entrepreneurs are even more compelling. VCTs provide tax-efficient investment opportunities while offering patient capital that is reinvested to support the long-term growth of UK businesses. The scheme also continues to offer a tax-efficient way to invest in the AIM market despite the new 20% inheritance tax on AIM shares. Now is a pivotal moment for close collaboration between the VCT industry and the UK Government to seize the opportunity for growth.”
David Mott, founder partner of Oxford Capital, said: “Founders and startups will be pleased that the government continues to back the Enterprise Investment Scheme. EIS is a really important tool for stimulating the creation of new and innovative high-tech businesses. It’s right that Rachel Reeves gives firm backing to EIS, as it means we’ll see more of the knowledge and tech-based businesses Britain does so well.”
“Investors have already backed over 56,000 companies since 1994, when EIS began, taking high risks while supported by the tax reliefs and other advantages of EIS. Out of these companies, many unicorns have emerged and with continued stability, investors will be looking to back the next generation of startups to fuel Britain’s economic growth. Rachel Reeves’ support for EIS means the UK has every chance of remaining the leading startup and venture capital market in Europe.”
Commenting on the government’s ongoing commitment to VCTs, William Fraser-Allen, Managing Partner at Albion Capital, said: “Albion welcomes the government’s recent commitment to strengthening the UK’s entrepreneurial ecosystem. By extending the Enterprise Investment Scheme and VCT (Venture Capital Trust) schemes to 2035, alongside pledging over £250 million to support small businesses, the government demonstrates a firm commitment to fostering a vibrant environment for entrepreneurship and growth within the UK’s private markets. This much-needed and awaited support will ensure the UK remains a global leader in the market, and we will continue to collaborate with the government to ensure this happens.
Fred Soneya, Co-founder and General Partner at Haatch, comments on tax rises for entrepreneurs in the Budget saying: “The Chancellor has announced that S/EIS remains a 100% IHT-exempt scheme for investors in fast-growing, exciting and ambitious UK businesses. While this is fantastic news for S/EIS investors, it’s still dampened by the reality that the entrepreneurial community is not particularly supported by the increases on Business Asset Disposal Relief (BADR) next year. These changes impact the ability of founders to build category-defining companies in the UK, with more than four in five small business owners stating that they plan to use this relief in the future.
“Equity incentive schemes are important for attracting and retaining talent – they allow founders to compete with the higher salaries on offer in the corporate world. We need changes that increase the UK’s competitiveness as a hub for innovation, not ones that risk stifling ambition, creating fewer jobs, and slowing investment in new products and services.”
