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THE 2015 SUMMER BUDGET MEANS MAJOR CHANGES FOR SOME PROVIDERS
DESPITE THE CHANGES, THERE IS NO DOUBT THAT THE GOVERNMENT SUPPORTS THE SCHEME
THERE ARE BARRIERS TO ENTRY FOR NEW PROVIDERS
There were several changes to the rules
governing VCTs in the 2015 summer Budget. The
introduction of a seven year age limit and £12
million cap on investment seemed to get most
of the attention, but as is often the case the
devil was in the detail. The ban on using money
raised by VCTs to fund management buy-outs or
company acquisitions will eliminate one of the
lower risk business models employed by some
VCT providers. The picture is more nuanced than
the headlines though - the government are keen
to encourage replacement capital - so we examine
this in more detail on page 31.
However disruptive the changes the July Budget delivered, they were made with the intention of securing ongoing compliance
with European State Aid rules. As David Gauke’s comment indicates, the government is determined to see the VCT scheme (and its
counterparts EIS, SEIS and SITR) continue. The VCT scheme has been in place since 1995 and has enjoyed support from successive
governments of all political persuasions. However many rule changes there might have been, the scheme is well established and
looks set to be around for a lot longer.
There’s a feeling in the industry that there can be barriers to entry for new entrants. With the high costs of setting up and running
a VCT new players would struggle to compete on price and a new, untested strategy would have to be very compelling to persuade
investors to part with their money. While there is certainly enough competition between the existing providers, there’s no quick and
easy way for newcomers to enter this space.
“The government’s aim is to make Britain the best place in Europe to do business. The tax-advantaged
Venture Capital Schemes continue to be an important part of meeting this aim, providing valuable
support to small and growing businesses seeking finance to develop and grow.”
David Gauke, The Treasury
NUMBER OF OPERATING VCT MANAGERS
(1995-2015)
EXPANSION
CAPITAL
AIM
LISTED
MBOS/
COMPANY
ACQUISITION
THE KEY IMPACT OF THE 2015 SUMMER BUDGET
RISK
+
-
Sources: Intelligent Partnership and the AIC
50
45
40
35
30
25
20
15
10
5
0
1995
2002
2009
1996
2003
2010
1997
2004
2011
1998
2005
2012
1999
2006
2013
2000
2007
2014
2001
2008
2015
“The high demand for VCTs is in part due to alterations to limits for pension contributions, is
also a reflection of growing investor confidence, and the strong performance of good Generalist
VCTs over the last few years”
Stuart Veale, Beringea LLP
Management Buy-Outs and Company Acquisitions are no longer allowed
3
10
14
16
18 21
25 26 27
31
41
44 43 41
36 36 34
32 32 32 32
There are barriers to entry for new providers