Autumn Statement: VCTs get boost as investment limit is scrapped

George Osborne has widened the investment universe for venture capital trusts (VCTs), removing the £1m investment limit per company rule, it was announced in today’s Autumn Statement.

Since the schemes were launched in April 1995, VCTs have been limited to investing £1m in a single company per tax year.

However, Osborne has now indicated VCTs can invest an unrestricted amount into a small business.

"In addition to the VCT changes that were consulted on in the Budget in March - the government will remove the £1m investment limit per company for VCTs to reduce the administrative burdens of the scheme," said Osborne.

In March the government relaxed the VCT and EIS rules to allow the schemes to invest in businesses with gross assets of up to £15m, up from the current level of £7m, to give the schemes greater flexibility.

The investment horizon has also been expanded to allow the schemes to invest in companies with 250 employees, where previously the maximum was 50 employees.

Patrick Reeve, managing partner of VCT manager Albion Ventures, said with the investment limit scrapped he can see VCTs potentially doubling in size.

He added the rule needed to be relaxed to fill the equity gap, with small business needing up to £5m of investment.

"I welcome the change and I believe with VCTs being allowed to put more investment into small businesses the sector - the average VCT size could grow to £50m, up from the current average of £21.8m," said Reeve.

"Potentially there will be a lot of consolidation in the sector - as VCTs will no longer have to launch several different offerings in order to get around the £1m investment limit.

"We are still awaiting the small print details in next weeks finance bill but with there being no figure on what the maximum limit is - VCT providers will be able to invest in a lot more liquid shares."

Ian Sayers, director general of the Association of Investment Companies, added he believes the rule change will see more money being pumped into the VCT sector.

"This represents a huge step towards removing the red tape affecting VCTs. It will allow more efficient investment benefitting VCTs themselves and the UK small business sector," said Sayers.