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ARTICLE · 24 JANUARY 2007

EIS And VCTS – 2006 And Beyond

Smith & Williamson
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The 2006 Budget signalled major changes to the EIS and VCT regime. Now that the market has had time to digest these changes, we consider the merits and pitfalls.

United KingdomStrategy

The 2006 Budget signalled major changes to the EIS and VCT regime. Now that the market has had time to digest these changes, we consider the merits and pitfalls.

VCTs

The changes announced in April 2006 seem likely to herald the end of a boom period for the Venture Capital Trust (VCT) market. VCTs raised over £1.2bn from private investors in 2004/05 and 2005/06, the primary attraction being the 40% income tax relief on investments up to £200,000.

Relief has been reduced to 30% as of 2006/07. In addition, the size of qualifying companies has been reduced, presumably in order to focus investment on the smaller end of small companies. Investors are now required to hold VCT shares for a minimum of five years as opposed to three.

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