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AIC Ian Sayers

AIC comments on UK VCT rule change


The UK Government has published its response to its consultation on changing the VCT rules, including significant commitments that the Association of Investment Companies (AIC) is pleased to endorse. 

Draft legislation reconfirms the Government’s desire to increase the range of companies eligible for VCT investment.  This includes SMEs with: assets of up to GBP15 million before investment (up from the current ceiling of GBP7 million); up to 250 employees (up from the current limit of 50) and increasing the amount an individual SME can receive from GBP2 million to GBP10 million.
These rules have to be agreed with the European Commission before they can be adopted but the AIC is encouraged that they form part of the proposed VCT legislation.
The legislation also sets out changes allowing an individual VCT to invest over GBP1 million in a particular company (currently sums larger than this have to be contributed by more than one VCT).  This reform offers the potential for VCTs to be more efficient and to capture substantial economies of scale. 
Taken together all these measures could deliver significant benefits for the VCT sector and its investors.
Less welcome are possible restrictions on VCT involvement in ‘buy-outs’, where VCT investment is used as part of a funding package designed to replace existing shareholders and drive a company onto its next stage in commercial development.
Ian Sayers (pictured), Director General, Association of Investment Companies (AIC) said: “Our enthusiasm for the positive measures set out today is tempered by proposals which may restrict VCT investment in buy-outs. These deals are invaluable in revitalising the commercial prospects of an SME when existing owners find themselves unwilling or unable to develop a business.  In these situations a VCT works with a new or existing management team to deploy new ideas, skills and enthusiasm to achieve the commercial potential of a company.  This is a natural and important part of the cycle of business development and can make a significant contribution to achieving the UK’s economic potential. 
“We will be concerned if undue restrictions are placed on VCTs but it looks like this is an area where the UK authorities are constrained by EU rules.  In any event our priority will be to establish what is driving these proposals and to understand what flexibility the UK has in addressing this issue.  Once we fully understand the Government’s intention our aim will be to ensure that any restrictions introduced are strictly limited to EU requirements.  We are hopeful that the Government will show goodwill on this matter as it does not intend for the buy-out changes to be applied to existing VCTs.  This is very welcome.”


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