“These were introduced last November, ironically perhaps, to bring the UK’s tax advantaged venture capital schemes into line with European Commission State Aid directives,” he said. “This has placed new restrictions on the age of companies that can receive VCT financing, how the funds can be used by companies and a lifetime cap on the overall level of such financing a business can receive through such schemes. Alongside this, HMRC has also made energy generation, a once popular area for VCTs and EIS, an excluded activity.”
Many VCT managers are also struggling to find deals that meet the more stringent, new criteria, he said.
“Fund raising plans at most individual groups are therefore not firm at this stage as it will ultimately depend on the level of cash they find themselves holding over the next few months. This may mean a slightly later start to the fund raising season than normal and we also expect some offers to be more modest in size as managers adjust cash requirements to a more focused opportunity set.
“In all we think investors contemplating VCT investment may need to act quite promptly if they want to access smaller fund raising offers from the highest quality managers, as shares are allocated on a ‘first come, first served’ basis and the most in-demand offers have the scope to achieve fund raising targets ahead of the end of the tax year,” Hollands advised.
