The Treasury is doubling up-front income tax relief for investments in venture capital trusts and raising the annual limit to £200,000 in a bid to encourage greater investment in the flagging sector.
From April 6, investors will get 40 per cent relief instead of 20 per cent as the Treasury seeks to stop the slide which has seen the VCT market slump to £40m from its 2000/01 peak of £420m.
The Treasury's decision has surprised observers, who expected it to push ahead with plans to pay the additional 20 per cent income tax relief to the VCT rather than the investor. But they believe the new relief – which will be available until April 5, 2006 – will provide a welcome boost.
The annual investment limit for enterprise investment schemes is also being raised to £200,000 from £150,000.
Hargreaves Lansdown investment manager Ben Yearsley says: “This makes VCTs a much more marketable product and it reduces the risk level because investors will be getting a lot of up-front tax relief. It should help the market.”