The Government is currently consulting on “Financing Growth in Innovative Firms” (otherwise known as the Patient Capital Review). It covers the perceived problems in building world-beating companies from a small size in the UK, and the ways the Government provides support to early stage companies. That typically means the VCT, EIS and SEIS schemes with their associated tax reliefs and other possible “support” programmes where the Government funds them directly.
Anyone who invests in this area, directly or indirectly, should respond to the public consultation – the deadline is the 22nd September to do so. That is particularly so because reading between the lines it seems that some folks in the Government feel the tax reliefs are too generous and even suggest that investment would take place even without the tax reliefs. But my view is very different – I certainly would be very unlikely to invest in VCT and EIS funds without generous tax relief. They frequently generate dismal investment returns and have very high management fees plus administration costs. In reality, the historic record has been very patchy and the tax reliefs only help to offset the duds (which were difficult to identify in advance).
As someone who has experience of this sector both as an investor and a director of companies needing to raise capital, I have put in a personal submission on the topic. It is present here: Financing-Growth
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
ShareSoc is working on its own submission in response to this consultation. Watch this space for further news!