Hargreaves Lansdown investment manager Ben Yearsley has welcomed suggestions that Chancellor George Osborne may re-examine the income and capital gains tax incentives granted to venture capital trusts.
Speaking at a recent event in Cheshire , Osborne hinted that the Treasury may look to make changes to the scheme to make it more capital-focused.
He said: “With the VCT scheme, there is a question mark over whether it is real venture capital and risky in a good sense of investing in growth businesses. When you are designing a tax incentive, you have to be careful that you are not creating a tax loophole.”
Yearsley says his comments were directed at limited-life VCTs, which are designed to wind up and return funds to shareholders after a limited period, generally soon after the five-year holding period for investors to retain their income tax relief.
He says: “This is perhaps what VCTs need by being refocused as a proper investment. If people are given tax breaks, it should be for a good reason. It should not be about the tax loopholes.”
The Association of Investment Companies has called on Osborne not to tar all VCTs with the same brush. Director general Ian Sayers says: “Any suggestion that the scheme should be scrapped is inappropriate in today’s economic environment. However, there is value in ensuring that the scheme is properly maintained to ensure there is no scope for loopholes.”
Chelsea Financial Services head of investments Matthew Woodbridge says: “These comments are off the cuff and it is important to recognise that not all limited-life VCTs are the same.”