Baker Tilly has warned that all funds raised by venture capital trusts will be subject to the new £5m annual investment limit, which caps the amount that VCTs can invest in qualifying companies.
In last year’s Budget, Chancellor George Osborne announced the Government would raise the annual investment limit for VCTs in qualifying companies from £2m to £10m from April 6, 2012. The £10m limit was due to apply to funds raised from April 6, 2012.
Any funds raised between April 5, 2007 and April 5, 2012 would still have been subject to the £2m investment limit. Funds raised before April 5, 2007 were protected from the cap.
In last week’s Budget, Osborne reduced the £10m limit to £5m.
HMRC says the limit will apply to all funds raised by VCTs, including any money raised before April 5, 2007.
An HMRC spokeswoman says: “The limit has been reduced to £5m. VCT monies raised prior to 2007 have not been subject to this annual limit up until now but they now will be.”
Baker Tilly head of capital markets Chilton Taylor says: “This move is so important because under the previous rules, when VCTs have sold investments made prior to 2007, the proceeds can be re-invested. That allowed a continuous flow of protected money in the VCT market.
“The £5m limit is going to hit all VCTs seeking a large fundraising. Under the new rules, companies will have to be involved in a number of smaller fundraisings.”
Hargreaves Lansdown investment manager Ben Yearsley says: “I think what is key here is you can invest £5m from a VCT into a company and this is a workable amount. VCTs can invest in more than one company.”