venture capital trusts
Industry Update - september 2022
1. INTRODUCTION
The latest news, updates and statistics on VCTs
2. Market Update
3. Considerations for Investment
4. Industry Analysis
5. Managers in Focus
6. What's on the Horizon
7. Further Learning
In partnership with:
Accredited by:
find inside
Industry Update - february 2022
02
Opening Statement Acknowledgements and Thanks Key Findings
1. Introduction
Opening Statement Acknowledgements and thanks Key findings
Market composition Fees and charges Performance targets MICAP Market snapshot
3. Considerations For Investment
VC and PE: supporting UK's economic growth A look at the FCA's amendments to the UK PRIIPs regime Revenue reserve: how VCTs pay divident in good times and bad
VCTs and the rising tax rates: getting relief from the taxman Understanding the VCT sunse clause "Give us a hand": Parliament seeks views on VCT, EIS and SEIS What managers say - Blackfinch Investments What managers say - Octopus Investments
2. market update
Blackfinch VCT solutions comparison
5. managers in focus
Entrepreneurship: the route to Britain's economic recovery Are tax reliefs good value for money? - MPs want to know Keep the music going: UK extends £4.5 billion Recovery Loan Scheme
6. what's on the horizon
Learning objectives CPD and feedback About Intelligent Partnership Disclaimer
7. further learning
scroll down
Photography by Interview by
03
his time is different The news that UK inflation has now hit 10.1% is the latest shock in what has been a year full of them. We’ve had war, soaring commodity prices and a savage rotation out of tech which knocked markets for six. UK GDP growth has gone into reverse and few are optimistic about the economy’s immediate prospects. What effect has all this had on VCTs? In the first seven months of the year, Generalist VCTs (which invest mainly in unquoted companies) are almost flat, with a total return of minus 0.7%, while AIM VCTs are down 22.3%. There’s nothing remarkable about this. AIM VCTs always respond quickest to changes in market sentiment, while the valuations of unquoted companies take some time to catch up. Eventually they do, however, as public market valuations are an important input into the way private companies are valued. The declines in value are not necessarily a sign of problems with portfolio companies. A recent update from Unicorn AIM VCT, for example, notes that the de-rating of certain sectors such as life sciences and biotechnology has been harsh, resulting in big share price falls, but the vast majority of the VCT's underlying businesses are well-financed and relatively resilient. It also has limited exposure to businesses dependent on consumer spending. Other recent VCT results are similarly cheery on portfolio company progress, if not on the macro outlook. At first sight, this may remind us of the downturn of 2020, which VCTs weathered remarkably well, despite an initial decline in valuations which reversed during the year. However, before we get too complacent, it is different this time. The fall in valuations is being driven by rising inflation and interest rates, which does not look like reversing any time soon. And while the economic disruption from Covid was mitigated by massive government support and loose monetary policy, this time the risks of spiralling inflation are tying the hands of policymakers and central banks. Recession is on the cards. This will have different impacts on different VCT-backed companies, depending on who their customers are, how essential their products or services are to those customers, their pricing power, and their profit margins going into any economic downturn. Downturns do come with silver linings for small companies. Mathematically, it’s easier for them to grow as the whole economy shrinks, as they are starting from such a low base. If they are in the right niche, or can adapt quickly to shifting conditions, they can do very well compared to larger companies that find it harder to change course. The list of successful companies that were founded in downturns is inspiring. WhatsApp, AirBnB and Zoopla were all born in the global financial crisis. Microsoft was founded during the oil-induced recession of the mid-1970s. It is likely that an economic downturn, while challenging for some VCT-backed companies, will present exciting opportunities for new investments. Exits may be hard to come by, but the benefit of VCT's permanent capital structure is that there is no need to rush things when times are tough. Managers will be poised to seize opportunities while supporting existing companies with guidance and follow-on funding where appropriate. For investors, it may be time to buckle up and remember that venture investing is a long game.
T
- Name Surname
The vast majority of the VCT's underlying businesses are well-financed and relatively resilient.
nick britton
Head of Intermediary Communications The Association of Investment Companies (AIC)
Downturns do come with silver linings for small companies.
opening statement
This time is different
www.theaic.co.uk 020 7282 5555 enquiries@theaic.co.uk
MICAP Statistical Analysis MICAP Market snapshot
Mini-Budget 2022: Sunset Clause extended beyond 2025 VCTs and the rising tax rates: getting relief from the taxman Understanding the VCT sunset clause "Give us a hand": Parliament seeks views on VCT, EIS and SEIS What managers say - Blackfinch Investments What managers say - Octopus Investments
2. MARKET UPDATE
3. CONSIDERATIONS FOR INVESTMENT
4. INDUSTRY ANALYSIS
5. MANAGERS IN FOCUS
6. WHAT'S ON THE HORIZON
7. FURTHER LEARNING
This report and the research behind it would not have been possible without the help and support of a number of third parties who enthusiastically shared their time and expertise. These busy professionals went to great lengths to provide us with data, their insights on the market, and useful comments and suggestions while peer reviewing initial drafts. We thank Nick Britton, head of intermediary communications at the Association of Investment Companies (AIC), who once again generously provided the opening statement for this update. We are grateful for his unfailing support over the years. We’d also like to show our gratitude to Dr Reuben Wilcock of Blackfinch Investments and Jessica Frank of Octopus Investments. We wish to thank Guy Rainbird of the Association of Investment Companies; Martin McTague, of the Federation of Small Businesses (FSB); and Marc Proudfoot of Howard Kennedy LLP for providing thought leadership articles for this report. The expertise of one and all have improved this study in innumerable ways and their support as sponsors has made this update possible. Any errors and omission are our own. We have relied upon MICAP for most of the data that we have based the update upon. MICAP is part of the same group of companies as Intelligent Partnership. We also carried out our own extensive desk research and interviews to verify their data. The update is made possible by our sponsors, who have contributed copy to the update and supported us by helping to meet production costs. So, a big thanks to Blackfinch and Octopus Investments.
Acknowledgements and thanks
learning objectives for cpd accreditation
Analyse the main events and developments in the VCT market Benchmark products and providers in the market against one another Evaluate the key fees and charges applied by VCT managers Explain how potential tax changes might affect the appeal of VCTs Describe major legislations and their impact on VCT Identify emerging trends and future development in the VCT market
✓ ✓ ✓ ✓ ✓ ✓
cpd
After you have reviewed this publication and before we fulfill your CPD certification request, we will be requesting your feedback on it. Your collaboration will assist us to enhance the learning activity, and will inform improvements to future publications.
04
Find out more at Managers in focus
Readers can claim up to 2 hours’ structured CPD. By the end of the update readers will be able to:
Invitation to contribute We want to help you showcase your expertise—it’s the most effective way to bolster your credibility with your peers as well as existing and potential clients. Do you have a story to share? Are there issues, trends, or events in the industry that you feel passionate about? Or maybe you just want to air your expert opinion about a current happening in the business. Whatever it is you want the world to know, we’d be happy to prominently display your views in our report alongside your headshot, at no cost to you. To discuss the topic you have in mind and to find out about our editorial guidelines, please contact: mohamed@intelligent-partnership.com
Contact us: lisa@intelligent-partnership.com Sponsorship Opportunities: chris@intelligent-partnership.com
EDITORIAL Mohamed Dabo CREATIVE Mar Alvarez SUB-EDITING Lisa Best & Mohamed Dabo RESEARCH Mohamed Dabo
MARKETING Carlo Nassetti DISTRIBUTION Michelle Powell SALES Chris White
Intelligent Partnership reserves the right to select or reject content for publication.
Key findings
05
percentage of businesses reporting an impact of energy prices on production and/or suppliers (late June 2022)
35%
expected increase in higher-rate taxpayers over the current parliament
£2.5m
proportion of businesses reporting they were trading (late June 2022)
93%
increase in UK’s consumer price index in May, up from 9% in April
amount delivered by PE and VC-backed businesses to Britain’s GDP in 2021
£102bn
number of the 100 companies on the fast-track list of UK tech companies (with the fastest growing sales over the past three years) that VCTs have invested in
15
increase in the national insurance contribution (NIC) threshold this year
£3,000
15%
£
proportion of all businesses reporting a decrease in domestic demand compared with the previous calendar month (May 2022)
%
This update has thrown up some interesting, sometimes alarming, sometimes revealing facts and figures. So we've selected a few to give you a flavour of the current context, some food for thought and some indicators of the fundamentals you should be aware of.
9.1%
(the highest since March 1982, when it hit 10.2%)
For technical insights into making the best use of VCTs, including guided case study sessions, and the opportunity to compare the products of six top-tier VCT managers, sign up to our free VCT Showcase workshops, supported by the Association of Investment Companies (AIC) and Irwin Mitchell. For more info or to book, click here.
Free VCT Event
06
Mini-Budget 2022: Sunset Clause extended beyond 2025 VCTs and the rising tax rates: getting relief from the taxman Understanding the VCT sunset clause “Give us a hand”: Parliament seeks views on VCT, EIS, and SEIS What managers say - Blackfinch What managers say - Octopus Investments
VCTs and the rising tax rates: getting relief from the taxman
Venture capital investors must always be aware of tax implications as they relate to investment, timing, and type of income.
07
Government implements tax incentives for investors in young companies, which have limited operating history and, therefore, limited access to bank loans or other debt instruments. The tax reliefs serve to bring together investors as well as concentrating investment expertise in favour of the small business sector, which plays an essential role in keeping the economic ecosystems alive and fostering change and innovation. Over the years, the UK’s government-supported venture capital schemes have gained popularity throughout many industries, and more investors have been able to find success through such investments. And for several decades, these tax-based schemes have become a dominant force in the financing of innovative British companies. Venture Capital Trusts (VCT) are a tax-based venture capital scheme designed to help smaller, higher-risk trading companies to raise finance. Demand for VCTs waxes and wanes depending partly on rule tweaks. In 2019/20 demand fell back because the rules were tightened to restrict where VCTs could invest, which made them a riskier prospect. The change was made in 2017, but it took effect more gradually. It’s also driven by changes in tax rules. For example, demand soars every time pension allowances become less generous, forcing those with higher incomes and large pensions to look elsewhere for tax relief. They came close to record highs between 2017 and 2019, when the pension lifetime allowance dropped from £1.25 million to £1 million.
More people are paying more taxes
Once again, taxes are driving demand for venture capital trusts (VCTs). The UK population is currently facing its highest tax burden since the 1940s. The freezing of personal tax thresholds in the UK until at least April 2026 compounded with faster than expected wage growth is set to bring 2.5 million people into the higher rate bracket, research by advisory firm LCP has found. The findings tally with data from HM Revenue & Customs (HMRC): as of 2019-20 there were 4.3 million people paying income tax at the higher rate of 40% or the additional rate of 45%. For the 2021-2022 financial year, the taxman estimates a 300,000 increase, with 4.6 million higher rate taxpayers. Part of the reason is wage growth. The tax agency now believes that wages and salaries grew by 2.6% in 2020-21 and 7.5% in 2021-22 – a significant increase from the 0.9% and 2% it previously forecast. Experts now estimate that such a staggering difference in taxable income forecasts is likely to bring the number of higher rate taxpayers to 5.2 million for the 2021-22 financial year. Looking beyond, it seems likely that up to 2.5 million extra people could be brought into higher rate tax between the general election in 2019 and an election in 2024/25. This means that more than one-in-five taxpayers could be paying at the higher rate in 2024-25 compared with fewer than 10% in 2010-11.
number of higher-rate taxpayers in 2021/22 (an increase of 300,000)
4.6m
Source: Office of Budget Responsibility (OBR)
National Accounts taxes as a share of GDP
Tax-savvy investors see opportunities
Once considered a niche investment option, VCTs have seen a boom in demand over recent years, raising £668 million in 2020 to 2021, which was 4% higher than in 2019 to 2020 (£645 million). Investors are attracted to these vehicles by the lucrative tax breaks and the innovative areas they invest in. If there’s a sensible place in your large and diverse portfolio for VCTs, they offer some impressive benefits. You can get attractive tax breaks such as tax-free dividends and 30% initial tax relief for any investment of up to £200,000 a year. Naturally, nothing said above is meant to minimise the prevailing economic troubles. British economic output declined for a second month in a row in April, weighed down by decades-high inflation, official data show. Gross domestic product fell 0.3% in April after a drop of 0.1% in March, the Office for National Statistics (ONS) has said in a statement. In June, the Bank of England raised its main interest rate at a fifth straight meeting in a bid to cool the pace of price rises. The ONS noted that "businesses continued to report the impact of price increases and supply chain shortages". Dominating the general economic malaise is the Russian-Ukraine crisis, a supply-side shock that affects the UK economy primarily through increases in fuel prices. In this dismal atmosphere, the watchword is probably caution, but investors are keen to have access to the best opportunities. As things progress, people will become more comfortable that the world has not stopped turning and we’ll begin to see an increase in confidence. In the meantime, however, smart investors recognise that now, when markets are down, could be a good time to invest. They could ride the investment with patience as the market ultimately rises, generating healthy returns—which, in the case of VCTs, are mainly obtained via tax-free dividends.
The tax reliefs remain untouched
National Insurance rates were increased by 1.25% in April, giving the VCT sector a boost, as wealthier savers look to reduce their tax bills and shelter their dividend income from the taxman. Reportedly, changes to capital gains and inheritance tax are also planned. While it’s true that in 2023, the rate of National Insurance will return to 2021/22 levels, it will be replaced with a 1.25% Health and Social Care Levy. As VCTs can be very good additional sources of income, the changes to the dividend tax are sure to influence people looking for income. Encouragingly, nothing was mentioned in the 2022 Spring Statement that might affect VCT investment. Also, nothing indicates the tax reliefs are under pressure. Taxes have very much been a political weapon in the last few weeks, as the battle between former Chancellor Rishi Sunak and Foreign office minister Liz Truss for the Conservative leadership and Prime Minister's position rages on. The leadership contest has put taxes, and how they will be cut or otherwise, under a blaring spotlight. If anything, the Chancellor is still in support mode to keep the economy moving. The government recognises the important role that small UK enterprises provide in terms of bringing dynamism to the UK economy and helping to create jobs. When the government is desperate to get the economy moving, it makes sense to encourage investors to put money into entrepreneurial businesses that are so crucial to economic recovery.
- name surname, job title, company name
Sponsor quote
1958-59
1968-69
1978-79
1988-89
1998-99
2010-11
2014-15
2018-19
2022-23
2026-27
1948
26
28
30
32
34
36
38
Historical data
2010-11 onwards, magnified scale
March 2020 forecast
October 2021 forecast
March 2022 forecast
Outturn
The UK population is currently facing its highest tax burden since the 1940s.
Mini-Budget 2022: Sunset Clause extended beyond 2025
Venture Capital Trusts (VCTs)—along with the Enterprise Investment Scheme (EIS)—will be extended beyond 2025, chancellor of the exchequer Kwasi Kwarteng announced in his mini-budget on 23 September 2022. The government remains supportive of the VCT and EIS schemes and sees the value of extending them in the future, notes HM Treasury in a budget document. Richard Stone, chief executive of the Association of Investment Companies (AIC), said: “This is a strong vote of confidence in VCTs and we applaud the government’s intention to continue the scheme beyond 2025.” The AIC has been lobbying for the removal of the so-called ‘sunset clause’. But former chancellor Rishi Sunak had not addressed the issue. The sunset clause, were it to be activated, would affect subscriptions for shares made after 5 April 2025 and would remove access to 30% income tax relief for both VCT and EIS investors. The confirmation that this will be avoided will give VCT (and EIS) investors a boost that one of the most attractive tax reliefs on offer will continue to be available after 2025. Nevertheless, there remain a number of reasonable recommendations on changes to VCTs that could direct more investment to the UK’s high potential SMEs. It remains to be seen whether the stated government objective of unlocking "private investment across the whole of the UK" and removing barriers to the flow of private capital and enterprise, including by way of disapplying legacy EU red tape, open the door to significant changes in the near future.
Since 2010, successive cuts have been made to the main rate of corporation tax, reducing it from 28% in 2010 to 19% in April 2017. This has resulted in the UK having a headline corporation tax rate which is significantly lower than the rest of the G7. The new budget has set out to cancel the increase in the main rate of corporation tax to 25% that was due to take effect from April 2023, keeping it at a competitive rate of 19%. Not all small businesses pay corporation tax, but many (including VCT investee companies) do. The levy is imposed on profit made from doing business (‘trading profits’) and investments or selling assets for more than they cost (‘chargeable gains’). New businesses of the type VCTs invest in find their tax liabilities particularly onerous. Reducing the tax burden these businesses will help entrepreneurs plan for their future, protect and grow their businesses.
Corporation tax rises scrapped
Other provisions of the Growth Plan likely to have a significant impact on UK’s startups and small businesses include the following:
What’s in the Growth Plan for small businesses?
The 45% tax band will be gone, effective April 2023. The top tier income tax rate will now be 40%. The goal is to encourage investment and help to retain experienced higher earners. These higher rate taxpayers value VCT’s upfront income tax relief. Will a 5% rate differential reduce their appetite for VCT? Unlikely, as long as the restrictions on pension contributions remain in place. Indeed, these have been a big driver of VCT demand over the last few years.
45% top rate tax band scrapped
The government will reverse the 1.25 percentage point increase in dividend tax rates from April 2023. This will benefit 2.6 million dividend taxpayers with an average saving of £345 in 2023-24 and additional rate taxpayers will further benefit from the abolition of the additional rate of dividend tax, says the government. This will support entrepreneurs and investors across the UK to drive economic growth. VCT investment got a boost when dividend tax increases were announced in 2021. By the same token, it is possible that there will be a drop in demand for VCT investments as a result of the dividend tax cut. What we shouldn't forget here though is that even with the abolition of that recent increase, dividend tax remains a hefty chunk, particularly for higher rate taxpayers.
1.25% dividend tax increase scrapped
The government will work with the devolved administrations and local partners to introduce investment zones across the UK. Investment zones aim to drive growth and unlock housing. Areas with investment zones will benefit from tax incentives, planning liberalisation, and wider support for the local economy. For example, there will be 100% relief from business rates on newly occupied business premises, and certain existing businesses where they expand in English investment zone tax sites. These investment zones will provide opportunities for VCTs to help boost investment in new local businesses.
New Investment Zones
The controversial off-payroll working rules (also known as IR35) will be repealed, to the relief of many small businesses that employ contractors. Self-employed IR35 rules, also known as the “intermediaries’ legislation”, were designed to work out whether a contractor is someone who is genuinely self-employed rather than a “disguised” employee, for the purposes of paying tax. From 6 April 2023, the much-hated rules will be discarded. Workers providing their services via an intermediary will once again be responsible for determining their employment status and paying the appropriate amount of tax and National Insurance contributions. Many VCT investee companies and other startups find independent contractors indispensable to the success of their business. This reform of the rules will free up time and money they could put towards other priorities.
IR35 rules scrapped
The Company Share Option Plan (CSOP) will allow qualifying companies to issue up to £60,000 of CSOP options to employees, double the current £30,000. Again, from April 2023. The increase will provide widening access to CSOP for growth companies, which is liable to benefit VCT investee companies.
CSOP doubles to £60,000
The government will make permanent the temporary £1 million level of the Annual Investment Allowance (AIA), which was due to expire after 31 March 2023. The AIA allows businesses to invest in capital equipment such as machinery and off-set the expense against profits of a single year, as opposed to depreciating the asset over several years. This greatly helps with business cashflow, a critical area for VCT investee companies. This will support business investment, provide businesses with more stability and make tax simpler for any business investing between £200,000 and £1 million in plant and machinery. This means businesses can deduct 100% of the costs of qualifying plant and machinery up to £1 million in the first year.
AIA frozen at £1m
The government will reduce NICs rates by 1.25 percentage points from November and cancel the Health and Social Care Levy coming in from April 2023. This will save 28 million taxpayers an average of £330 a year, says the chancellor. This measure will also make it cheaper for small businesses, such as the small expanding companies that VCTs invest in, to employ more staff being worth an average of £9,600 for over 900,000 businesses.
1.25% National Insurance rise scrapped
The government will bring forward the 1 percentage point cut to the basic rate of income tax to April 2023, 12 months earlier than planned. This is a tax cut of over £5 billion a year. It will allow workers, savers and pensioners to keep more of their income, with an average gain of £170 in 2023-2024, according to the government. Income tax relief is a main attraction of VCT. It’s hard to imagine that the basic rate of income tax going from 20% to 19% will make a major difference to the scheme’s appeal.
Income tax reduced to 19%
Summary Budget measures
Income tax NIC – April 2022 increase in NIC reversed from 6 November and Health & Social Care Levy scrapped Corporation tax to remain at 19% – planned 2023 increase to 25% cancelled Off payroll labour – previous legislative changes repealed from April 2023 Introduction of VAT-free shopping for overseas visitors New “Investment Zones” with enhanced tax reliefs and relaxed planning frameworks Removal of cap on bankers’ bonuses SEIS and CSOP limits to be increased. EIS and VCT reliefs will be extended beyond 2025 Annual Investment Allowance to stay at £1m for capital allowances No stamp duty on first £250,000, for first time buyers that rises to £425,000 – comes into operation today
Basic rate cut to 19% (from 20%) both to take effect from April 2023; dividend rate reduced (reversing previous hike)
Update: This report was published before the Chancellor of the Exchequer’s mini-Budget 2022 speech on 23 September 2022. We’re providing the following update, a look at the potential impact on VCTs of the government’s Growth Plan, a package of measures that aims to get growth back to its historic average of 2.5% per year.
08
ecord breaking fundraising by VCTs in the 2021/22 tax year demonstrates industry and investor confidence in the scheme. Even so, there have been concerns about the ‘sunset clause’ that sits within the VCT rules. These worries are not to be dismissed, but there are very good reasons to file the sunset clause under ‘things to be aware of’ rather than ‘critical issues’. The sunset clause is a provision in VCT rules which says that investors subscribing for VCT shares after 5 April 2025 will no longer be eligible for the 30% income tax relief which they currently receive on investment. A similar sunset clause also applies to the Enterprise Investment Scheme (EIS). As 2025 approaches it is no surprise that this measure is attracting increasing attention. The most significant reason that this is not a critical issue for advisers is that the sunset clause only applies to VCT shares issued after the cut-off date of 5 April 2025. In other words, subscriptions for shares which are issued in advance of this date will remain eligible to receive the 30% relief. As long as the VCT continues to make investments in line with the scheme rules, and the investor holds the shares for five years, the income tax relief will not be withdrawn. Of course, an adviser should consider if the VCT is expected to make qualifying investments as required, and meet other scheme rules, after the possible activation of the sunset clause. However, VCTs issuing shares will be confident that they will achieve this. For an adviser, the existence of the sunset clause does not significantly change the assessment you would make in any other year. After all, in theory at least, the 30% relief could be withdrawn at any point, but this is generally assumed to be unlikely because of the role VCTs play in supporting small businesses seeking growth capital and the government’s continuing desire to see this type of investment continue. This brings us to the wider reason that the existence of the sunset clause should not be considered a critical concern. The sunset clause was inserted into VCT and EIS legislation when the UK was still part of the EU, as a condition of the European Commission giving approval for these schemes under its “state aid” rules. The state aid rules stop EU member states from subsidising their domestic industries and undermining competition within the single market. The single market is a cornerstone of the European project, and its integrity is closely guarded by the European Commission. It is common for state aid to be time-limited. In contrast, sunset clauses are not a common feature of UK tax rules. UK policymakers continue to prioritise a thriving small business sector as key to achieving job creation, levelling up and economic growth. VCTs continue to support these ambitions. They showed resilience during the testing economic conditions caused by Covid-19 and continued to raise funds and invest in ambitious smaller companies. The sunset clause does nothing to change the government’s priorities or the case for continued tax incentives to encourage investment in the sector. The government is aware of industry calls to address the sunset clause at the earliest possible date. It is expected to set out its intentions on this in due course – most likely towards the end of 2023. While the industry would, of course, like to see progress on this as soon as possible, it also recognises that with inflation still present and cost of living pressures still growing, ministers have competing priorities to deal with. With all this in mind, the sector remains confident that VCTs justify the tax reliefs made available to their investors and that the sunset clause will be satisfactorily addressed in good time before it would otherwise be activated.
R
Introduction
Market Update
Considerations for Investment
Industry Analysis
Managers in Focus
What's on the Horizon
Further Learning
guy rainbird
Public Affairs Director the Association of Investment Companies (AIC)
thought leadership
Understanding the VCT sunset clause
For an adviser, the existence of the sunset clause does not significantly change the assessment you would make in any other year.
UK policymakers continue to prioritise a thriving small business sector as key to achieving job creation, levelling up and economic growth. VCTs continue to support these ambitions.
“Give us a hand”: Parliament seeks views on VCT, EIS, and SEIS
The UK Parliament’s Treasury Committee recently asked for your ideas about the workings and effectiveness of the government-supported venture capital schemes—more specifically the Venture Capital Scheme (VCT), the Enterprise Investment Scheme (EIS), and the Seed Enterprise Investment Scheme (SEIS).
09
The call for evidence, issued on 7 June 2022, is part of a wider inquiry into the UK’s venture capital market. The legislative probe will explore the ability of firms to source financing to scale up, the extent to which start-ups and established industries cooperate, and the effectiveness of tax incentives. The MPs are seeking for written evidence in the following areas:
Direct economic contribution of UK private equity and venture capital backed businesses, 2021
The current state of the venture capital industry in the UK; The level of co-operation/integration between start-ups and established industry The operation and effectiveness of the regulatory regimes The role of other key bodies and how they can support the VC market The effectiveness of any other government or public sector intervention in the VC industry The effectiveness of government policy around venture capital in meeting wider government objectives The operation and effectiveness of the current tax incentives (such as the Enterprise Investment Scheme (EIS), the Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trusts (VCTs)) in the venture capital market, including any options for change.
Science & technology, net zero, and levelling up
Commenting on the new inquiry, Rt. Hon. Mel Stride MP, Chair of the Treasury Committee, said: “Venture capital has a key role in ensuring innovative UK firms prosper, and we want to make sure the market is working well. “The Government’s plan to enable the UK to continue advancing the frontiers of science and technology, as well as its ambitions on net zero and levelling up, will all be boosted if businesses are able to finance their work to achieve international success. “As a committee, we’ll be seeking to establish if investors have the best environment to back new or growing UK firms, and would welcome in particular evidence on what lessons can be learnt from other parts of the world.”
The above areas of inquiry are just “examples,” says the committee, and “responses should not necessarily be restricted to [these] areas.”
Source: British Private Equity & Venture Capital Association (BVCA)
Total economic activity of, and related to, UK private equity and venture capital backed businesses, 2021
- Dr Reuben Wilcock, Head of Ventures, Blackfinch
An incredible 27 years since VCTs were introduced they remain an excellent opportunity for investors to benefit from exciting growth and income opportunities alongside the incentive of immediate tax relief.
of GPD generated by UK PE & VC backed businesses
£102
billion
jobs in UK PE & VC backed businesess
1.9
million
of employee earnings directly supported by UK PE & VC backed businesses
£58
of UK GPD is supported by UK PE & VC backed businesess
5%
The ongoing quest for perfection
The outsized impact of VC investment on the UK economy has prompted policymakers to encourage investment into startups, early-stage, and emerging companies that have been deemed to have high growth potential. The tax-advantaged venture capital schemes created for this purpose have frequently been fine-tuned over the years to prevent abuse, keep them focused on their original purpose, or make them more accessible. For example, barring VCT, EIS, and SEIS from investing in all forms of energy projects was intended to focus these tax-efficient vehicles on the higher-risk investments for which they were originally intended. A number of measures were designed to reduce delays and ensure more investment flows to innovative businesses. Some of the key changes proposed by the Office of Tax Simplification, such as simplifying the application process or reducing some of the requirements, were meant to simplify the scheme for both investors and entrepreneurs. Other changes proposed by the industry—e.g., increased flexibility for replacement capital within EISs and VCTs—have been turned down by the government, at least for now. Those advocating the change argued that relaxing the replacement capital rule would increase the quantity and quality of capital deployed by VCTs by creating a larger pool of suitable opportunities. After considering the proposition, the Treasury said: “The government will not be introducing flexibility for replacement capital within the tax-advantaged venture capital schemes at this time, and will review this over the longer term.” There has always been a tension between what may appear to be restrictive requirements and the need to ensure that enterprise investment schemes are not being exploited. Nobody knows these venture capital schemes more than the industry players. So, government’s consultation (and the industry providing constructive feedback) is an effective way of improving both the making of policy and its implementation. As long as the UK works to maintain its leading position as a global hub for technology, the venture capital sector will continue to have a crucial role to play. Venture capital investment has been instrumental to the development of technology and the Internet, with venture firms partnering with the founders of iconic UK companies like Cazoo, Deliveroo, and Revolut. Continuing public support for the venture capital sector demonstrates the UK government’s commitment to the industry. Given the current economic uncertainty, further support to the sector will be a much-welcomed initiative by many businesses facing challenging headwinds.
Sponsor quote.
1,920
1,154
719
Employment (000s)
3,792
Total
£113b
£208b
GDP (£b)
Employee earnings (£b)
£102b
£63b
£43b
£58b
£37b
£19b
UK PE & VC backed businesses
Suppliers to UK PE & VC backed businesses
Related consumer spending
Note: employee earnings is defined as gross earnings and is included within the total GDP figure. This analysis does not include private equity firms and venture capital firms. Figures may not sum due to rounding.
10
It’s now been 27 years since the VCT scheme was introduced. How has the market changed? The Patient Capital Review in 2018 refocussed VCTs towards genuine risk to capital opportunities, ensuring alignment with the spirit of this tax advantaged legislation. The opportunity of exposure to unlisted high-growth companies within a diversified wrapper has broadened the sectors appeal, and mainstream VCTs are also becoming an attractive option for those who have reached their pension limits. The economy is facing major headwinds, with soaring inflation, major tax rises, and global shocks - including Russia’s invasion of Ukraine. How are VCTs faring? The last few years have certainly been challenging for VCT portfolio companies. Some investors are staying in cash because of the uncertainty, but others are recognising that in an inflationary environment this may not be a smart move. The combination of immediate tax relief and growth potential on a medium timescale makes VCTs an attractive proposition. How can VCTs help investors in the current economic environment? VCTs tend to invest in smaller unlisted firms that display an unrivalled agility when it comes to responding to challenging circumstances. Unquoted companies are typically uncorrelated to listed markets adding further diversification to a client’s overall investment strategy. We’ve seen most of our portfolio companies continue to grow despite macro factors and are excited about their future.
DR reuben wilcock
head of ventures, blackfinch
What Managers Say
Leveraging private capital through VCTs is vital
www 0123456789 info@
- reuben wilcock, head of ventures, blackfinch
The challenges faced by the world in the last three years have been met by the unrelenting passion and grit of UK founders whose teams continue to rapidly innovate, attack new markets and thrive.
https://blackfinch.com 01452 717070 enquiries@blackfinch.com
Recent data show that the average age of the typical VCT investor has dropped by 11 years since 2017. What are the future implications for the scheme? It’s encouraging that the average age of VCT investors has dropped in recent years which shows that the benefits of the scheme are appealing to a broader demographic. Low minimum investment levels are helping to make VCTs accessible to a younger audience who often share the values of exciting digital portfolio companies that are working towards a more sustainable future. The impact of the war in Ukraine is expected to slow growth in the UK and other advanced economies. What is the outlook for VCT? VCT portfolio companies are typically operating in very large, growing global markets. Whilst slowing growth in these markets may trouble huge enterprises that have significant market share, earlier stage companies are still able to grow, stealing that market share by innovating quickly. The hope is that markets will improve by the time these companies look to exit, and for now we still see great opportunity in the space. The latest outlook of the British Chambers of Commerce projects that a legacy of the pandemic (and the ongoing issues with the UK’s trade deal with the EU) is a more unbalanced economy with business investment and trade lagging the wider recovery. What should the government do? Leveraging private capital through VCTs is a vital way to support the most promising early stage high-growth companies in the UK. Investing into these businesses helps communities and people to thrive, building back a stronger, more resilient economy. Now more than ever private capital has an important role in achieving those goals, as the demands on government funding are so great.
11
jessica franks
Head of Retail Investments Products, Octopus Investments
VCTs are different from each other
- jessica franks, head of retail investments products, octopus investments
It is clear that VCTs are now very well understood by a larger number of advisers, resulting in more advisers considering whether VCTs might be suitable for their clients.
octopusinvestments.com +44 800 316 2295 support@octopusinvestments.co.uk
Parliament launched a venture capital market inquiry on 28 April 2022. What do you hope will come from the legislative probe? The Treasury Select Committee launched the inquiry in April and are hearing evidence from many interested parties to understand more about how to strengthen the support in place for the UK’s venture capital industry. We have a start-up culture that is the envy of Europe, so we’re keen to see the recommendations that are made to boost this thriving sector. It has been reported that advisers are increasingly encountering younger, and therefore longer-term, clients in the VCT space. What do you see as the implications for the VCT market? We’ve seen the average age of investors begin to trend younger, but only coming down slightly over the past 5 years. This is likely to be the result of frozen pension and ISA allowances encouraging slightly more people to consider VCTs as part of their annual savings plan. More interestingly, it is clear that VCTs are now very well understood by a larger number of advisers, resulting in more advisers considering whether VCTs might be suitable for their clients. As a result, VCTs now provide advisers with a very accessible way to enable their clients to back exciting early-stage companies, and in return VCTs are able to provide more support to UK smaller companies. Out of the 100 companies on the fast-track list of UK tech companies with the fastest growing sales over the past three years, VCTs have invested in 15. How can advisers make sure they are capitalising on this growth potential? The growing number successful companies backed by VCTs has helped VCTs stand out as a source of funding for entrepreneurs. Top entrepreneurs are looking for an investor who also has the skills, experience and expertise to support them in achieving their growth ambitions. The VCT managers who can provide this support may have access to different investment opportunities as a result.
How are you responding to the current headwinds of high inflation, rising interest rates, and geopolitical tension? We’re in a fortunate position as one of the largest venture investors in Europe to have resource available, such as our portfolio management team, to focus on working with our portfolio companies, ensuring they have the right level of support available during this uncertain time. And separate parts of the investment team to continue actively seeking new opportunities - economic uncertainty can be a conducive time for creativity, and small companies tend to be well positioned to adapt to change swiftly, and even to take advantage of it to grow faster. It is a fact that many start-ups do fail in all market conditions, but more so in times of financial crisis. What sectors can currently provide greater chances of success? We have portfolio companies across different sectors but most companies have technology at their core. Technology allows companies to adapt to the changing market around them, leading to opportunities. Where possible we need to make sure our portfolio companies can capitalise on these. What factors should investors be looking out for in selecting a VCT fund at this time? It’s important to stress that most VCTs are different from each other, and understanding each specific opportunity is relevant regardless of the economic outlook. VCTs can operate in different sectors of the early-stage market, can offer different levels of diversification based on existing holdings, and can have different levels of investment management support available for portfolio companies.
12
MICAP Statistical Analysis MICAP Market Snapshot
MICAP Statistical Analysis
In this section we will take a look at market trends, some statistical breakdowns, open offers as well as the fees and charges you can expect to see from VCT offers. Unless otherwise stated, the analysis is based on data obtained from MICAP and is correct as of 30 August 2022.
Open offers
Funds raised by Venture Capital Trusts (VCTs) passed the £1 billion milestone for the first time in the 2021/22 tax year, raising £1.13 billion (£1,133 million) to be invested in small and innovative UK companies. This represents a 65% increase compared with the 2020/21 tax year (£685 million) when the pandemic had an impact on fundraising, according to data from the Association of Investment Companies (AIC). The most popular offers filled well in advance of tax year end. Overall, 13 of the year’s 27 offers were fully subscribed by the end of March 2022. Autumn, the start of the VCT season when many of the year’s offers open, saw robust demand, with 22 VCT offers raising £514 million by the end of November. This was more than twice the amount at the same stage of the previous year. All in all, 27 share offers (compared to 22 last year) raised money for a total of 42 Venture Capital Trusts (30 last year). As we go to press, nine VCT offers are currently open, all following a Growth & Income strategy. The bulk of them (89%) have a General Enterprise focus, which offers great flexibility in a volatile market as these VCTs can choose from the entire panoply of eligible companies, regardless of sector. The rest of the open VCTs (11%) have chosen to focus on Technology, a sector full of promise. 2021 was the year of UK tech, with mega-rounds and unicorns combining to put Britain far ahead of other European countries like France and Germany. The UK government’s Research and Development (R&D) roadmap has set out the UK’s vision and ambition for science, research and innovation. The government is set to increase investment into research and development to almost $30 billion a year as part of this initiative. The UK is well-placed to capitalize on its status as a science superpower. So, despite the dismal economic climate, some VCTs are seeing much promise in the technology sector.
Target number of investee companies, open offers
The VCT fundraising season got into full swing in September and was a time of several rounds of impressive fundraising. During the pandemic and at a time when the UK’s young companies have needed it most, the VCT sector has raised £685 million for investment in small, innovative UK businesses. Where reported, open VCT offers target an average £1,000,000 in fundraising, less than the historical average minimum fundraise of £2,400,000. Whatever the reason, lower fundraising targets bring in more investors. That is what happened last year, when a 7.5% drop from the previous year allowed the most popular offers to be filled well in advance of the end of the tax year. Overall, 13 of the year’s 22 offers (comprising 20 of the 30 individual VCTs raising funds) were fully subscribed before 5 April 2021. Much of the investment went to support healthcare, science and technology businesses which have helped in the battle against coronavirus, said the AIC. “It demonstrates that demand for VCTs and the benefits they bring investors remains high at an extremely difficult time,” said former AIC boss Ian Sayers.
minimum subscription of open offers
average
min
median
Maximum
24.5%
8.00%
17.00%
49.00%
mode
minimum
maximum
£2,900
£1,000
£6,000
minimum fundraise of open offers
£1,500,000
£1,000,000
£2,000,000
Two thirds (66.7%) of the companies that the open offers invest in are in the early stage of development. These very young businesses are generally pre-revenue, at a stage where they are raising revenue to develop their product or concept. A third (33.3%) of the investee companies are later-stage businesses. While still in the growth stage, these businesses have gotten off the ground and are working on increasing their market share. They’re in a commercial operation and have solid traction with customers. So, they’re generating revenue and experiencing solid growth.
£3,111
£2,500
£5,000
MINIMUM SUBSCRIPTION OF OPEN OFFERS
Market composition of open offers by investment sector
General Enterprise
88.9%
11.1%
Technology
Investee companies
Early Stage
Later Stage
66.7%
33.3%
The UK has a rich ecosystem of such young businesses with growth potential. But without funding and specialist support, many might never get off the ground. The ability of VCTs to provide ongoing support to these businesses is one of the sector’s key advantages. VCTs have already invested more than £1.6 billion in small and medium sized-enterprises (SMEs), according to the AIC. The VCTs buy small stakes in a large number of these companies (an average of 24.5 for these open offers) and hold them for a number of years, supporting their growth. Over time, the VCTs add new SME investees and sometimes make further investments into those companies that are beginning to fulfill their promise. This allows VCT investors to Invest in a diverse portfolio of early-stage businesses and claim attractive tax reliefs. The large number of investee companies also offers investors the chance to achieve genuine diversification.
The open offers are targeting a 5% dividend. The performance figure does not take into account the tax benefits VCT investors receive. These include the 30% income tax relief, the capital gains tax exemption, and any tax-free dividend. Even when considering the 35 VCT offers that opened in the current tax year, most of which are now closed but expected to reopen this year, the average target dividend (or those that specify a target, which sits at around half) remains just over 5%. It is worth noting that in some cases, when a successful exit takes place, some managers may pay a special dividend to distribute the gains. However, most use such cash injections to smooth out dividend payments as close to the target return as possible. This is something to double check with managers in the due diligence stage.
Target returns
Minimum
5.00%
open offers
Medium
With the most frequent subscription at £3000, VCTs remain accessible to mainstream investors. This has probably contributed to the growing demand and the huge success during this tax year.
Minimum subscription
The average number of investee companies targeted by the nine VCT offers presently open sits at around 27. However, when looking at the offers that have been open in 2022/23 (many of which may well reopen in this tax year), that figure jumps to 55. This is likely to be because the very largest VCTs which will need a larger number of investees to spread their high inflows across, are still restricted by rules regarding annual and lifetime investment limits for VCT-qualifying companies. As a result, in order to deploy all of their funds, they will need to target a higher number of companies. Of course, other managers may select a higher number of investee companies in order to generate more risk mitigation through more diversification. However, it is important to note that studies have suggested that, beyond a certain number, the additional costs generated by individual investments (time for the selection process, due diligence, paperwork, ongoing oversight) are no longer justified. As a result, understanding the manager’s reasons for the number of target investees may be a useful question to ask.
Diversification
In our previous analysis in February, we noted that the declining trend in fees and charges that had persisted throughout the previous several months had accelerated. Since then, this downward movement in fees seems to have paused. One notable exception is the AMC charged to investors which has dropped by 11% since February. Could this be an inducement to wary investors in the midst of an economic downturn? When averages of total initial charges and AMCs are taken from the 35 VCT offers that opened in the 2022/23 tax year, they give a lower level of fees: Total initial charge: 3.37% Total AMC: 1.94% These figures give a better benchmark against which to judge the fees of those offers currently open.
Fees and charges
Initial Charge to Investors Excluding Adviser Fee Initial Charge to Investee Company Total Initial Charge AMC Charged to Investor AMC Charged to Investee Company AMC Annual Per Fee Annual Per Hurdle Annual Admin Charge
2.89 1.33 3.78 1.78 0.43 2.11 17.22 13.89 0.14
August 2022
CHARGES
10 8 6 4 2 0
NUMBERS OF OFFERS THAT CHARGE EACH FEE
Total initial charge
Total initial deal charge
Total AMC
ANNUAL PERF FEE
ANNUAL PERF HURDLE
EXIT DEAL FEE
TOTAL ANNUAL ADMIN FEE
EXIT PERF FEE
EXIT PERF HURDLE
13
MICAP Market Snapshot
Leveraging its market overview position, MICAP is able to offer IFAs exclusive insight into the wider VCT market. As a sister company of MICAP, we are able to offer the following snapshot of data, which is updated in real time, and pulled from the MICAP website.
16
14
17
VC and PE: supporting UK’s economic growth A look at the FCA’s amendments to the UK PRIIPs regime Revenue reserve: how VCTs pay dividend in good times and bad
VC and PE: supporting UK’s economic growth
Just as it was starting to rebuild from the damage wrought by the Covid-19 pandemic, the economy was blindsided by Russia’s invasion of Ukraine.
18
Now, more than ever, what the UK economy needs is the capital and operational expertise that businesses require to grow and succeed, creating jobs, driving economic growth, and building stronger, more sustainable companies. That is precisely the job of venture capital (VC) firms. They are crucial to powering those companies operating at the cutting edge of innovation across a range of sectors, not least climate change. PE investment tends to be more focused on later-stage growth rather than the early-stage growth that VC focuses on. That makes VC a more crucial area for the economy in many ways as, without it, the larger companies that bring so much in the way of international reputation and business would simply not exist. As the “innovation nation”, home to some of the most exciting and dynamic tech businesses in the world, the UK continues to attract significant international attention. In a post-Brexit world, ensuring Britain remains a global destination for investment is vital to the long-term success of its economy. The available data suggests the VC & PE industry is well placed to play its part.
uk tech continues to outperform its european neighbours
The UK is Europe’s leading centre for venture capital (VC) and private equity (PE), capturing almost a third of all venture capital investment in Europe in 2020. The UK is home to a concentration of tech, fintech, artificial intelligence and other fast-growing sectors that provide excellent investment targets. London’s start-up ecosystem ranks second globally behind Silicon Valley. And the UK’s track record in creating pioneering and high-growth tech companies is second to none in Europe. “The provision of venture capital funds in Europe is expanding at a very fast rate and the UK industry remains its largest and most mature arm,” the Bank of England said in a report entitled Venture capital in the United Kingdom. In 2021, half of Europe’s top ten largest fintech deals were in the UK. Last year, 29 unicorns were created in the UK, including the e-commerce platform Depop, payments platform GoCardless, car selling platform Motorway, insurance disrupter Marshmallow, and the challenger bank Starling Bank. This took the UK’s total unicorn figure to 116 by the year’s end, meaning that 25% of the UK’s total unicorns were created in 2021 alone. The UK has more unicorns than France (31) and Germany (56) combined.
UK is Europe's VC and PE leader
UK’s tax-advantaged VC schemes: the envy of the world
The growth in supply of VC in the UK has been heavily influenced by the tax and regulatory regime, by developments in capital markets, and by the industrial environment. Changes in taxation in recent years and the encouragement given by the government to smaller companies have tended to encourage investors to allocate part of their funds to investment in riskier but potentially highly profitable businesses. The government has now in place 4 schemes designed to help small or medium sized companies and social enterprises grow by attracting investment. These government-supported VC schemes offer tax reliefs to individuals who buy and hold new shares, bonds or assets for a specific period of time. Venture Capital Trusts (VCTs), one of the schemes, offer tax reliefs for individuals investing indirectly in eligible unquoted or AIM-quoted companies. This works by individuals investing in a VCT, which in turn makes investments in a range of companies. Survey data indicate that the schemes are not crowding each other out. For example, “the Enterprise Investment Scheme (EIS) is more associated with micro and small-sized firms operating in service or hospitality sectors of the economy. At the same time, VCTs are more aligned to medium-sized firms operating in capital-intensive or professional service sectors,” the HMRC notes in a report. The government’s tax department’s quantitative research also suggests that the schemes are generally working as intended, in terms of how investments are used, bridging finance gaps, and wider effects on investees. What about private equity (PE)? According to PitchBook's UK & Ireland Private Capital Breakdown, the PE market since the pandemic began has been on a bull run that continued into 2021, with £57.9 billion (about $78.9 billion) transacted across an estimated 804 deals in the first three months of the year. PE firms with a surfeit of dry powder are targeting UK-listed companies that remain relatively undervalued.
Source: BVCA; GSER; Beauhurst
Hitting a record high of $15bn in 2020, it raised more venture capital investment than Germany and France combined
In 2021, half of Europe’s top ten largest fintech deals were in the UK.
$15bn
United Kingdom
$6.6bn
Germany
$5.6bn
France
VC and PE: impact on the economy
Companies supported by private equity and venture capital provide employment and earnings for hundreds of thousands of workers. Overall, in 2021, private equity and venture capital backed businesses employed 1.9 million workers in the UK, collectively earning £58 billion. This reflects the economic activity supported by the investments of private equity and venture capital firms. Suppliers to private equity and venture capital backed businesses employed an additional 1.2 million workers earning £37 billion and generating £63 billion of GDP in 2021. The consumer spending of workers of private equity and venture capital backed businesses and their suppliers supported an additional 719,000 workers earning £19 billion and generating £43 billion of GDP in 2021.
VC and PE: catalysts of sustainable development
Sustainable VC/PE is a useful tool to catalyse other types of capital to achieve sustainability objectives. Sustainability-driven innovation offers an opportunity to boost economic growth, improve living standards, and generate a variety of employment options. Such innovation is constantly generated by businesses at all stages of development as they create, apply, and adapt breakthrough technologies and innovative business models. While companies that have a positive environmental or social impact are critical to driving sustainable growth, many of these companies, and particularly the smaller ones, face difficulties in accessing and attracting funding. Where more common financing channels (such as bank loans and bonds issued by large corporations with steady cashflows and deep balance sheets) may not be available, PE/VC could provide at-risk capital for many of these young, often innovative companies. Furthermore, both VC and PE funds increasingly align with value creation linked to social and environmental considerations. These firms are recognising the material value brought by sustainable businesses and social enterprises, which has resulted in a greater availability of sustainable PE capital that follows, to varying degrees, one or more of the disparate standards being developed or already in the market. The more SMEs are pushed to recognise and implement ESG values, the more of them will be available for the VCT portion of VC, allowing a greater focus from them on this area.
of Europe’s top 10 largest deals were in the UK in 2021
50%
19
The PRIIPs Regulation was developed to increase the confidence of retail investors in financial markets and enhance investor protection standards. Advisers who produce, advise on or sell PRIIPs, such as shares in VCTs, are required to provide retail investors with a KID prior to the investor acquiring the product. The KID is intended to provide retail investors with a uniformed document to allow them to compare a wide range of products quickly and easily. As such the PRIIPs Regulation lays down uniform rules on the format and content of the KID and the provision of the KID to retail investors. Following BREXIT, the FCA has been granted greater powers to amend the content requirements of the KID. Following a consultation process the FCA has now published its amendments to the rules on the information that must be included in the KID. In particular, the amendments: • replace the requirement and methodologies for presentation of performance scenarios in the KID with a requirement for narrative information on performance and factors that may impact performance; and • create a new requirement, that VCTs must be assigned a summary risk indicator score of no less than 6 regardless of what score is calculated under the PRIIPs calculation methodology, the nature of investments made by the VCT and the past performance of the vehicle. The new rules came into force on 25 March 2022 and PRIIPs manufacturers have until 31 December 2022 to make the appropriate changes to their KIDs.
marc proudfoot
Partner, Head of Investment Trusts Howard Kennedy LLP
A look at the FCA’s amendments to the UK PRIIPs regime
www.howardkennedy.com 0123456789 info@
Questions have long been raised as to how much significance investors place on the information in the KID when making an investment decision.
Proposals to remove performance scenarios from KIDs The FCA have acknowledged that the performance scenarios as prescribed under the old rules pose a risk to consumers. The new rules replace the requirement to provide prescriptive performance scenarios with the requirement to provide a narrative on expected performance and the factors that could impact this. This narrative is required to include information on the main factors upon which returns depend, the underlying or reference values and how the return is determined. The narrative must also include a favourable, negative and worst-case scenario in relation to how the investment could perform. These amendments give far greater freedom to PRIIPs manufacturers to decide on the key risks that investors should consider when making an investment decision.
Proposals to require VCTs to be assigned a summary risk indicator score of no less than 6 in KIDs The FCA has chosen to single out VCTs specifically in relation to the summary risk indicator score. Stating in the consultation that due to the methodology used to calculate the score and the frequency at which assets are valued, VCTs are generally being given a summary risk indicator score that does not truly reflect the risks involved with the investment. The new rules provide that VCTs must be assigned a summary risk indicator score of no less than 6 regardless of what score is calculated under the PRIIPs calculation methodology, the nature of investments made by the VCT and the past performance of the vehicle. This will be a significant change for the VCT industry with only a handful of VCTs currently including a summary risk indicator score of 6 in their KIDs and the majority being assigned a score of 3.
What are the consequences for VCTs?
Questions have long been raised as to how much significance investors place on the information in the KID when making an investment decision. The proposals to remove the performance scenarios have generally been welcomed as they make the KID easier for retail investors to understand. While it is generally accepted that the PRIIPS methodology for calculating the summary risk indicator score led to VCTs being given erroneously low scores, questions have been raised as to how helpful it is to investors for all VCTs to be given a prescribed summary risk indicator score. A single score that applies to the whole industry does not reflect the different risk profiles associated with different types of VCTs. The FCA is encouraging PRIIPs manufacturers to increase their summary risk indicator score where they believe that it does not accurately reflect the risks involved with the investment. However, it seems unlikely that manufacturers will choose to increase the summary risk indicator score above the score that the FCA have specifically prescribed, particularly if the score calculated under the prescribed methodology is significantly lower. If all VCTs adopt the same risk indicator score it would seem to defeat one of the key purposes of the KID, to allow investors to quickly and easily compare a large number of products.
What impact will this have on VCT investors?
Revenue reserve: how VCTs pay dividends in good times and bad
The Covid-19 pandemic led to a significant drop in business revenues, causing many UK-listed companies to announce suspensions, omissions or cuts to their dividend payments.
20
However, as reported in the following excerpt from the Investment Trust Dividend Monitor, by the Link Group, investors in Venture Capital Trusts (VCTs) were spared the worst of the dividend drought. Because of their ability to set aside revenue reserves in good times to distribute when the going gets tough, most VCTs were able to continue paying dividends even at the height of the pandemic when lockdowns decimated businesses across most sectors. By the end of March 2022, UK dividends had rebounded by a third in the twelve previous months, but had not recovered their pre-pandemic highs, according to the UK Dividend Monitor. Revenue reserves by venture capital trusts, which fell by 6.8% in 2021, are starting to build up again. Going into the post-Covid era, VCTs seem well positioned to continue rewarding investors with attractive dividends.
An effective protection from dividend drought
The revenue reserve explains why investment trust dividends proved so resistant to the effects of Covid-19 that so badly infected dividends from the companies around the world making goods and providing services in which trusts invest. By tucking away a portion of the dividends a trust earns each year, in bad times it can release this cash and shield its investors from cuts in the dividends it receives. This smooths out short-term fluctuations and provides a steadier, more reliable income to its shareholders. Trusts drew on their reserves through the pandemic, but they also took advantage of special rules that permit them to distribute some of their capital gains as dividends. In our last edition, we reported that reserves had fallen by one sixth. The decline in reserves has slowed markedly. Since last June (based on latest available accounts) they have fallen by a further 6.8% and we judge that trusts are likely to start rebuilding reserves from here on.
Revenue reserves £m (latest annual report)
Source: Link Group
The biggest increase came from Venture Capital Trusts (VCTs), up by £221m or two thirds. Property trusts and renewable infrastructure also made a significant contribution to growth. VCTs have proved very popular with investors in recent years who have been attracted by the generous tax breaks that come with this category of fund. A reduction in the lifetime allowance on pension funds is catching more and more savers with punitive tax on their pension pots.
Octopus Titan, which has grown dramatically in recent years on the back of repeated issuance of new shares and good investment performance, is the largest dividend payer of them all. It distributed a huge £135m in dividends in 2021, a record for the sector and more than a quarter of the total £492m paid out by VCTs last year. Blackfinch Spring VCT, targets a dividend yield of 5% from 2024 which, of course, are variable and not guaranteed. VCT dividends fell by 6.6% in 2020 owing to the chilling effects of the pandemic, but have more than made up for that since. Moreover, they have more than tripled in the last ten years. Private equity has some similarities to venture capital but the investment trusts do not attract the same tax breaks. It too has become a significant payer of dividends, worth £576m in 2021, the largest of any category of trust. 3i Group is dominant, accounting for two thirds of the dividends from the sector in 2021. The dividend stream from private equity investment trusts is more volatile than from VCTs owing to the way the business model functions but also because investors in the latter prize the tax-free income very highly, whereas investors in the former tend to focus more on capital gains.
Alternatives - Investment trust dividends £m
Beyond funds focused on listed equities, investors can choose from a broad range of other investment themes, covering private assets, debt, property (the largest dividend-paying alternative sector) and much more. This diverse group was responsible for two thirds of the total dividends paid by investment trusts of any kind in the year to the end of March 2022, up from just two fifths a decade ago. In the twelve months to the end of March they distributed £3.65 billion between them, an increase of 25%.
£ million
£480
£500
£520
£540
£560
£580
£600
£620
£640
£660
Regional
Global equity
UK
By tucking away a portion of the dividends they earn each year, in bad times VCTs can release this cash and shield their investors from cuts in the dividends they receive.
in dividend yield is equivalent to a taxable yield of around 8% for an additional-rate taxpayer
The measure has deterred pension saving among wealthier individuals who have looked elsewhere for tax-efficient options for their capital. With a 30% tax credit on capital subscribed in a VCT share issue and all income and capital gains tax free, VCTs are the first port of call for many investors now. VCTs have been very big issuers of shares in recent years as a result. The companies held in a VCT do not tend to pay dividends, unlike ‘regular’ equities, because they are early-stage growth companies. Instead, VCT managers pay dividends from realised profits when they sell stakes in successful holdings.
Source: gov.uk
Distribution of the proportion of investors claiming VCT relief by size of investment, 2018-19 to 2019-20
£150,000 to £200,000 £100,000 to £150,000 £75,000 to £100,000 £50,000 to £75,000 £25,000 to £50,000 £20,000 to £25,000 £15,000 to £20,000 £10,000 to £20,000 £5,000 to £100,000 £2,500 to £5,000 £1,000 to £2,000 Up to £1,000
0
5
Investment band
2019-20
21
Blackfinch Octopus Investments VCT solutions comparison table
Manager video content
22
dr Reuben Wilcock
Head of Ventures
blackfinch.com 01452 717070 enquiries@blackfinch.com
Video content
23
Blackfinch Spring VCT 2013 £679.8m / £17.5m Generalist The Blackfinch Spring VCT targets investment into early stage high-growth technology enabled companies with a focus on research & development and innovation, with the potential for high growth and an exit within a reasonable time frame. 11/11/2019 Growth & Income New Share Issue Up to £20m, with a £10m over-allotment facility if required Targeting dividends of 5% p.a. from 2024 onwards, along with ‘special dividends’ through earlier exits £3,000 2.50% 2.5%; with 0.5% rebated in order to faciliate any Adviser Ongoing Charges, Execution-only Intermediary Ongoing Fees and Direct Investor Ongoing Fees. Any money left over from the rebate will be used to buy additional VCT shares for the investor. 20%; of the amount by which the performance value per share at the end of an accounting period exceeds the high water mark. This is the higher of 130p and the highest performance value per share at the end of any previous accounting period. Please see 'Fees and Charges' section of our brochure (pages 26 and 27) for more information on all of our fees, available at the following link*
Calculus VCT 2016 £30m Generalist The VCT provides exposure to a diversified portfolio of smaller, entrepreneurial UK companies, with a focus on the fastest growing sectors in the UK - technology, healthcare and media. The VCT had 7 exits in 2021 which is proof of our ability to back successful businesses. Sep-21 Capital growth and income via tax free dividends New share offer £10million 4.5% of NAV annually £5,000 3% for advised investors 1.75% charged to the VCT 20% subject to a hurdle of 105p
Octopus Future Generations VCT 2000 N/A Generalist with sustainability focus Octopus Future Generations VCT invests in high growth business across three themes; building a sustainable planet, empowering people and revitalising healthcare. The VCT is managed by Octopus Ventures, one of Europe’s most experienced venture capital teams. 2022 Capital growth (and dividends after 3-5 years) - £20 million 5% £3,000 3% Up to 2% 20% + VAT Admin and accounting charge 0.3%
Offer Name Year Founded AUM (total)/AUM (VCT) Type of VCT Description of offer Launch date Investment Objective Type of fundraise Target fundraise Target return/yield Minimum investment Initial fee AMC Performance fee Other fees
*https://blackfinch.ventures/assets/Blackfinch_Spring_VCT_Brochure_d6d4d33c25.pdf
VCT solutions comparison
VCT solutions
24
25
here’s no doubt that entrepreneurs who are looking to set up a business, or grow an existing venture, are facing strong headwinds at the moment. Following past recessions, it was small businesses and entrepreneurs who kick-started the economy once more, and they will yet again be vital as we seek to rebuild in the wake of the disruption caused by covid. The pandemic has brought huge changes to how we work, with hybrid and remote working now far more common, while the net zero agenda presents unprecedented challenges and opportunities for businesses in all sectors. ‘ESG’ (environmental, social, governance) considerations are high on the agenda, and give the sense that businesses are facing a turning point, where entrepreneurship will be more important than ever. For it to flourish, the Government needs to play its part, by backing up its words about supporting entrepreneurs and risk-takers with real actions, not least the publication of the long-awaited Enterprise Strategy which is being kicked into the long grass, but must be retrieved. Supporting entrepreneurs at all levels A new economy will call for new types of businesses to fill niches and provide innovative new products and services. A new scheme should be introduced, building on the legacy of the New Enterprise Allowance (NEA), to provide funding and mentoring to would-be entrepreneurs. The NEA, set up in 2011, officially ceased operating at the start of this year, but over the course of its existence, it helped tens of thousands of people begin working for themselves, boosting entrepreneurship among people who were looking for work, were lone parents, or who were on sickness benefits. A commitment to helping people from groups often under-represented among entrepreneurs – such as people from an ethnic minority, women, and disabled people – to get their business dream off the ground would also be welcome. ESG means large companies should think about how they can demonstrate corporate responsibility. The audit reform proposals should require corporate boards to be made accountable for payment practices. Promising ventures should not be starved of cash because their customers refuse to pay on time and in full. Improving the physical and digital infrastructure of the UK would also help entrepreneurs and growing businesses – especially those based in rural areas. Large projects like HS2 are welcome, but equal attention needs to be paid to local buses, roads, and train services, while upgrading broadband and mobile connectivity is another must.
Martin McTague
National Chair Federation of Small Businesses (FSB)
Entrepreneurship: the route to Britain's economic recovery
A new economy will call for new types of businesses to fill niches and provide innovative new products and services.
Encouraging innovation The questions raised by the pandemic and by how best to cut emissions require innovation, including improvements in all areas of running a business, not just creating new technologies, welcome though they are. Our research shows that new-to-firm innovation is significantly more prevalent than new-to-market innovation, and the Government needs to put stronger emphasis on business improvements in its innovation policy to encourage productivity growth. We support the Help to Grow: Digital and Management voucher schemes, but think the eligibility criteria for both should be expanded to allow businesses with fewer than five employees to participate. Excluding 90 per cent of businesses from the programmes is impossible to justify, especially when take-up is too low among the small group who are eligible, meaning there is wasted capacity. Growth incentives To move towards new ways of doing business, it’s vital that the tax system acts as an incentive rather than just a barrier for entrepreneurs and for growing businesses. Given this, it’s concerning that the proposed reforms to the R&D tax credits system will make an already complicated system even more burdensome for small businesses to navigate. If the Government’s goal via the reforms is to decrease a supposed reliance on intermediaries to help with successful applications, the solution should be to make the system easier for small businesses to use. The tax system has a large part to play in other regards. Small businesses would be more likely to engage in investment if they knew they could write off losses at a similar rate to that at which gains are taxed, producing a more symmetrical and equal system. The Chancellor should ensure that the capital allowances system supports purchases of second-hand equipment to boost productivity, and ensure that capital allowances work as well for smaller businesses with lower profits as they do for large businesses. The Annual Investment Allowance should be improved and enhanced on that basis, learning lessons from the super-deduction. Unlocking investor funds The Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trust (VCT) scheme are all key tools helping small firms to grow through funding from individual investors, and providing various reliefs to businesses. The schemes are however under-used, as small firms – with so much else on their plates – have lower awareness of their existence and potential utility than they could have. Awareness campaigns to help investors and businesses alike be more aware of the potential to invest in small firms would be a welcome initiative from the Government, and we would like to see the SEIS made permanent, rather than coming to an end in 2026. Additional funds could also be unlocked for investment by making it simpler for people with pensions to invest in small businesses. At the moment, this route is largely cut off due to complex HMRC requirements, and a lack of understanding of the opportunities on offer, both on the part of investors and of pensions advisors. These are issues that the Bank of England’s Productive Finance Working Group has been looking at ways to mitigate, so that savers and unlisted companies can both benefit. We can’t wait forever A clear and forthright plan to help nurture new businesses, and to allow existing ventures to grow, would benefit everyone – not least HM Treasury. We are doing all we can to get the message across to Government that this is an area that it cannot neglect.
Additional funds could also be unlocked for investment by making it simpler for people with pensions to invest in small businesses
www.fsb.org.uk 0808 20 20 888 customerservices@fsb.org.uk
“Are tax reliefs good value for money?” MPs want to know
The Treasury Committee is launching a new inquiry into tax reliefs and is seeking your views. More specifically, the lawmakers want to know whether the system of reliefs as a whole achieves benefits for the UK economy that justify their cost.
The investigation will look at the many tax reliefs available to businesses as well as those available to individuals on their personal tax liabilities. Do the tax reliefs impact employment, investment and growth in the UK? Are the reliefs being used in the way they were intended? Do they cause problems to the tax system, such as through tax evasion or avoidance? What potential reforms would you like to see? Do you have any proposals for the addition or removal of reliefs? What do you think of the current administration framework and means testing? The deadline for submitting evidence is 5pm on Friday 19 September 2022.
“The VCT scheme is working exceptionally well”
The current probe is the second parliamentary inquiry relevant to VCTs this year. In response to the previous one, the Treasury Select Committee inquiry into the UK’s Venture Capital industry, the Venture Capital Trust Association (VCTA) said: “Venture Capital Trusts are funds which play a vital role in the UK funding ecosystem, supporting businesses to move from early stage towards full commercialisation. “The VCT scheme is working exceptionally well, with over 1,000 of the most ambitious companies across the UK currently benefiting from VCT funding. These firms span sectors as diverse as digital technology, medicine development, advanced manufacturing, and retail. “The role of VCTs in supporting successful entrepreneurs will become even more important as economic conditions become more challenging.”
of VCT investors claimed tax relief for investment of £50K or less
83%
Number of investors claiming VCT relief by size of investment, 2017-18 to 2019-20
Source: HMRC
Investment band Up to £1,000 £1,000 to £2,500 £2,500 to £5,000 £15000 to £10,000 £10,000 to £15,000 £15,000 to £20,000 £20,000 to £25,000 £25,000 to £50,000 £50,000 to £75,000 £75,000 to £100,000 £100,000 to £150,000 £150,000 to £200,000 Total
2017-18 1,285 830 1,745 3,505 1,730 1,895 1,160 3,415 1,030 995 540 1,005 19,130
2018-19 1,440 1,005 1,965 3,600 1,815 1,870 1,265 3,410 1,040 950 530 1,035 19,930
2018-19 1,585 1,235 1,770 3,110 1,475 1,645 1,065 2,855 870 800 430 885 17,725
27
Keep the music going: UK extends £4.5 billion Recovery Loan Scheme
Scrambling to support small businesses facing increasing financial pressure, the government has announced it is extending the £4.5 billion Recovery Loan Scheme (RLS) by a further two years.
RLS provides UK businesses with access to finance as they grow and recover from the disruption of the Covid-19 pandemic. The successful scheme, which offers government-backed loans to small businesses, is now on its third extension. Applications to the new business loan scheme will open on 1 August and run until 30 June 2024. RLS launched in April 2021 and was originally scheduled to run until 31 December 2021. At Autumn Budget 2021, the government extended the scheme by six months to 30 June 2022 and made some adjustments to its terms. The government provided a guarantee of 80% for loans made before 1 January 2022 and 70% for loans after that date. The borrower remains 100% liable for the debt. RLS has already supported some 19,000 businesses with an average loan of £202,000, which the companies have used for various purposes, such as managing cash flow, investment and growth. The maximum amount of external finance available will be £2 million per business in Great Britain, and £1m for businesses in scope of the Northern Ireland Protocol. Personal guarantees will be permitted, but not required, for facilities above £250,000, bringing the scheme in line with standard commercial practice in business lending. The actual amount offered and the terms are at the discretion of participating lenders. Loans are available through a network of accredited lenders, listed on the British Business Bank’s website. Says the government, “Recognising that businesses and the UK more generally are now in a better position than they were during the pandemic, lenders may now require a personal guarantee from the borrower, in line with standard commercial practice.” Nonetheless, the principle behind the extended RLS remains unchanged: the government will underwrite 70% of lender liabilities, at the individual borrower level, in return for a lender fee. “Lenders must ensure that the benefits of the government guarantee are passed through to businesses.” Examples of businesses which have benefited from the scheme include Leeds-based firm Wildfire Marketing, which used the loan to take on new employees to help the business grow; and White Light Ltd, a lighting firm which required finance to purchase new equipment for the latest West-End shows. The extension of the scheme provides further government support for businesses grappling with cost pressures and adds to measures already announced by the Chancellor, such as increasing the Employment Allowance, slashing fuel duty, and introducing a 50% business rates relief for eligible high street businesses.
- kwasi kwarteng, business secretary
The extension of the Recovery Loan Scheme will help ensure we continue to provide much-needed finance to thousands of small businesses across the country, while stimulating local communities, creating jobs and driving economic growth in the UK.
Not your VCT
While VCT aims to help unquoted companies attract equity investment by offering investors a range of tax incentives, RLS is an ad hoc programme that helps UK businesses alleviate financial stress and grow in the post-Covid era. Like VCT-qualifying companies, businesses that can access RLS must be trading in the UK. But while VCTs exclude certain types of trade (e.g., dealing in land, providing legal or accountancy services, and operating and managing hotels and nursing homes), RLS is potentially open to any type of business. However, a company must be able to show that it has been adversely impacted by the pandemic, and that it would be viable were it not for the pandemic. Like VCT, the scheme has financial health requirements. In the case of RLS, a company needs to show that it is not in collective insolvency proceedings (unless the business is in scope of the Northern Ireland Protocol in which case different eligibility rules may apply).
VCT and the other venture capital schemes, which focus on stimulating growth in early-stage businesses, can use all the help they can get. Over the years, the industry has put constant pressure on the government to reduce the restrictions and expand the programmes. For its part, the government seeks to balance the obvious need to bridge the small business funding gap by promoting the VC schemes (among other measures) and the obligation to prevent the ever-present potential for abuse. Therefore, the industry always welcomes new and additional sources of small business funding such as RLS. By providing finance to small business owners, revenue is created, jobs are created and the economy strives. The more funding given, the stronger the economy becomes. The additional funding helps to incentivise small businesses to conduct research and development, in hopes of eventually commercialising their products. An article by the Institute of Chartered Accountants in England and Wales (ICAEW) strikes a rather positive note: “The government is aware that access to finance is an issue for businesses and the market has become used to the availability of finance on beneficial terms. The banking sector maintains that despite widespread uncertainty, loan books are holding up well and the rates of default on the emergency loans – the Coronavirus Business Interruption Loan Scheme and Bounce Back loans – were rather lower than modelling exercises had predicted.” David Petrie, ICAEW’s head of Corporate Finance, urges the government to keep up the level of support for small businesses: “At some point the music will stop on this form of state support for certain businesses and their banks, but now is not the time.”
“Don’t stop the music” … not yet
There’s hardly a more critical time for increased small business funding than the present. In this inflationary post-Covid, post-Brexit era dominated by the Russia-Ukraine war, SMEs are struggling with soaring energy costs, congested supply chains and staff shortages. To meet the enormous challenges, small businesses need financing for a variety of purposes, including (but not limited to):
Growing and expanding the business
Hiring a larger staff
Increasing business inventory & merchandise
Bridging the growing SME funding gap
business funding needs
Managing current staff’s payroll
Acquiring supplies, tools & equipment
Conducting research & development
Improving cash flow
It’s only by supporting start-ups and small businesses to spur job creation and economic growth that the UK stands any chance of quick recovery from the economic devastation of the past three years.
company insolvencies in England and Wales in Jan 2022 (double that of Jan 2021)
1,560
Learning Objectives CPD and Feedback About Intelligent Partnership Disclaimer
Learning objectives
How did you do?
29
Covered in Section 2: Market Update
Benchmark products and providers in the market against one another
Identify the main events and developments in the VCT market
Covered in Section 5: Managers in Focus
Explain how potential tax changes might affect the appeal of VCTs
Describe major legislations and their impact on VCT
Covered in Section 4: Industry Analysis
Evaluate the key fees and charges applied by VCT managers
Covered in section 3: Considerations for Investments
Identify emerging trends and future development in the VCT market
Covered in Section 6: What’s on the Horizon
CPD and feedback
This publication has achieved accredited status from the CII and PFS. Members of these professional organisations represent the majority of the insurance, investment and financial services industry.
Readers of the VCT Quarterly Update can claim up to two structured CPD hours towards their CII or PFS member CPD scheme for the time spent reading this Update (excluding breaks). The review process included an assessment of the technical accuracy and quality of the material against CPD Accreditation standards. Achieving the recognised industry standard afforded by these organisations for this Update, and our training, demonstrates our commitment to delivering only balanced, informative and high quality content to the financial services and investment community. In order to test your knowledge and obtain a CPD certificate readers will need to complete a short online test and provide feedback on the update. This includes 10 multiple choice questions to demonstrate learning and a feedback form to assist in the compilation and improvement of future reports. To claim your CPD visit: intelligent-partnership.com/cpd
Intelligent Partnership actively welcomes feedback, thoughts and comments to help shape the development of these Quarterly Industry Updates. Greater participation, transparency and fuller disclosure from industry participants should help foster best practice and drive out poor practice. To give your feedback please email: publications@intelligent-partnership.com
About intelligent partnership
31
Intelligent Partnership is the UK’s leading provider of insights and education in the tax advantaged and alternative investments space.
We provide a wide variety of ways to keep advisers and industry professionals up to date with the latest developments. Our content includes a range of engaging, accessible and CPD accredited resources as well as industry leading events:
Free, award winning series including EIS, VCT, BR and AIM Updates offering ongoing observations and intelligence, the latest thoughts and opinions of managers and providers and a comparison of open investment opportunities.
quarterly industry updates
Unlocking the practical and regulatory aspects of various areas across the tax-advantaged and tax planning spaces including estate planning and business relief, our guides for advisers, lawyers and accountants are updated annually to provide handy, accessible and everyday resources.
Professional Guides
A deeper dive into individual providers giving their input on particular market issues and more detail on the strategies and offerings they have developed to address them.
PROVIDER SPOTLIGHTS
A weekly snapshot of the latest articles, commentary and market data for financial services professionals, in an easy-to-read briefing on Tax Efficient Investments.
WEEKLY INVESTMENT BRIEFINGS
Free events online and across the country, giving advisers the opportunity to build their knowledge of tax wrappers and less mainstream asset classes and ask questions. Providers present their investment opportunities on a like for like basis and online events include additional content from independent expert commentators.
SHOWCASES
Heading into their eighth year, the Growth Investor awards and the Growth Finance awards celebrate the role of the UK SME investment and finance communities in job and wealth creation.
AWARDS
Intelligent Partnership produces INTERGEN, an immersive experience that focuses on the wealth, tax and estate planning needs of different generations and aims to reshape the future of professional advice for every generation. For more information, contact:
CONFERENCES
Our CPD accredited e-learning programme is aimed at regulated advisers, wealth managers, paraplanners, accountants and solicitors that require a recognised level of knowledge & understanding in areas of Tax & Estate Planning.
ACCREDITATIONS
chris@intelligent-partnership.com
Intelligent Partnership produces INTERGEN, an immersive three-day virtual experience that focuses on the wealth, tax and estate planning needs of different generations and aims to reshape the future of professional advice for every generation. For more information, contact:
disclaimer
This publication is not included in the CLA Licence so you must not copy any portion of it without the permission of the publisher. All rights reserved. No parts of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means including electronic, mechanical, photocopy, recording or otherwise, without written permission of the publisher. This publication contains general information only and the contributors are not, by means of this publication, rendering accounting, business, financial, investment, legal, tax or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional adviser. Neither the contributors, their firms, affiliates nor related entities shall be responsible for any loss sustained by any person who relies on this publication. The views and opinions expressed are solely those of the authors and need not reflect those of their employing institutions. Although every reasonable effort has been made to ensure the accuracy of this publication, the publisher accepts no responsibility for any errors or omissions within this publication or for any expense or other loss alleged to have arisen in any way in connection with a reader’s use of this publication. This publication is based on the authors’ understanding of the structure of the arrangements detailed, the current tax legislation and HM Revenue & Customs practice as at September 2022 which could change in the future. It is not an offer to sell, or a solicitation of an offer to buy, the instruments described in this document. This material is not intended to constitute legal or tax advice and we recommend that prospective investors consult their own suitably qualified professional advisers concerning the possible tax consequences of purchasing, holding, selling or otherwise disposing of VCT-qualifying shares. Intelligent Partnership is not authorised and regulated by the Financial Conduct Authority and does not give advice, information or promote itself to individual retail investors. It is the responsibility of readers to satisfy themselves as to whether any arrangement contemplated is suitable for recommendation to their clients. Tax treatment depends on an investor’s individual circumstances and may be subject to change. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors.
