Changes to VCT rules

Due to rule changes over the last few years, VCTs operate under several different regimes, depending upon when funds were raised.

The latest rule changes mainly relate to the size of the underlying investment. For funds raised prior to 5th April 2006, the underlying company can have a maximum of £15 million in gross assets, prior to investment and £16 million immediately after.

For VCT money raised between 6th April 2006 and 5th April 2007, the investments can have a maximum of £7 million gross assets before and £8 million after investment by the VCT.

For money raised after 6th April 2007, two new rules have come into force. Firstly, a company can have no more than 50 employees. Secondly, it can only receive a total of £2 million in funding from VCTs in a 12-month period. The latter rule is slightly ambiguous in that the £2 million rule only applies to newly-raised money. Once the new rules have been satisfied for newly-raised money, older VCT money can then be invested alongside over and above the £2 million level without affecting the VCT eligibility. In other words a company can receive up to £2 million in a 12-month period under the new rules, then receive further VCT funding under existing rules from older VCTs in the same 12 months. However, the effect is to try and ensure that VCTs invest only in genuinely small enterprises. The Government has attempted to increase the risk profile.