Budget 2010: Treasury considers relaxing VCT rules

The Treasury is considering relaxing the rules which govern VCT investment.

In the Budget Report, the Treasury says it will work with the industry to look at changes including: increasing the employee limit to either 100 or 250; the gross assets limit to £15m before the investment and £16m after, as well as hiking the annual investment limit to £5m for qualifying companies.

Under current rules, investee companies can have a maximum of 50 employees and can only receive £2m from VCTs in any year.

The report also says following consultation, the European small enterprise definition will not be introduced next month.

AIC director general Ian Sayers says: "Removing restrictions on where VCTs can invest would make it easier for the sector to support smaller and growing businesses in the UK.

"This would be timely as the withdrawal of banks from small business lending have increased the range of companies which are unable to secure development capital from traditional sources - a problem which VCTs are designed to address.

"To make changes to the scheme the UK will have to convince the European State Aid authorities that reforms are merited and these moves to gather evidence are a vital first step in this process. We look forward to working with the Treasury to develop the evidence base to make these reforms happen."

Chief executive Giles Hargreave says: "The rules which are due to come into force in April are absurd, as they made sure nothing could happen.

"Going forward, if these changes come into force, it would mean we are heading back to a far more sensible regime.

"If the Government really wants to make as difference, they should increase the tax relief from 30% to 50%. That really would get a lot more money in and be more meaningful."

More to follow...