22 / 92
22
IMPACT OF VCTs
Before we move onto discussing
investing in VCTs in more detail, it
makes sense to examine if they are
meeting their stated purpose of
helping smaller companies secure
investment - and if that investment is
then subsequently put to work by the
investees; creating jobs, growing the
economy and making the VCT scheme
good value for the UK taxpayer.
DEPLOYING MONEY
Research from the AIC highlights some
key metrics and is a good source for
readers who want to explore more
about this topic. The report looks at a
sample of £1.04 billion (£722 million in
initial support and £315 million in follow
on investment) of VCT investment into
404 SMEs.
Today the average investment size is
£2.31 million per company and in 2013
85% of the initial investments VCTs
were in the finance gap identified by the
government (SMEs seeking between
£250,000 and £5 million) where banks
have been reluctant to lend since the
financial crisis in 2008. (That number
fell to 80% in 2014, perhaps indicating
the beginnings of a change in direction
for the banks). 128 companies received
£255.99 million of new and follow
investment in 2014.
82% of companies see an increase in
turnover post investment, and the
average increase in 2014 was £12.71
million. 80% of companies see an
increase in employment, and the
average increase was 51 new employees.
76% of investee companies have a
representative of the VCT management
team on their board (Source: AIC, Going
for Growth and Nurturing Success,
Delivering Growth).
VALUE FOR MONEY FOR
THE TAXPAYER?
Since investors get 30% Income Tax
relief when they invest in a VCT, this
makes the UK taxpayer the biggest
stakeholder in the success of the VCT
scheme, and obviously the government
is determined to ensure that this
investment represents good value for
money for taxpayers.
According to the AIC, information
provided by 208 VCT investee
companies showed they paid £352
million in tax in 2013. This is equivalent
to 89% of the total tax relief paid, in just
one year of operation. One can conclude
that when corporation tax, national
insurance contributions, Income Tax
and VAT are taken into account (for both
the firm and its employees) it’s not hard
to imagine that the tax receipts from
successful firms over the course of their
lifetime can more than offset the tax
reliefs.
£2.6m
INVESTMENT
Average VCT investment per SME
£2.31m
INVESTMENT
Average size of initial VCT
investment per SME
32%
EXPORTS
Proportion of SME investee companies
who exported in 2013
2014
LARGEST SECTORS:
£9.8m
TURNOVER
Average turnover increase in each
SME since VCT investment
£12.71m
TURNOVER
Increase in each SME since VCT
investment
GOING FOR GROWTH
2014
2015
TECHNOLOGY
AND IT
BUSINESS
SERVICES
MANUFACTURING
& ENGINEERING
26%
RESEARCH & DEVELOPMENT
Proportion of SME investee companies
invested in R&D in 2013
49
NEW JOBS
Average number of new employees per
SME since VCT investment
51
NEW JOBS
Average number of new employees
per SME since VCT investment
Source: AIC (2014 and 2015)