Budget 2013: VCT buybacks come under scrutiny

Venture Capital Trusts (VCT) and the viability of enhanced buybacks for these schemes are set to come under scrutiny as part of the 2013 Budget.

The Budget document said the government has concerns about whether VCTs offering enhanced buy-backs are operating within the spirit of the legislation.

'The government will continue to monitor particular aspects of the venture capital schemes to ensure that they remain well-focused and supportive of businesses needs,' the Budget document stated.

Oliver Bedford, co-manager of the Hargreave Hale AIM VCTs, said that while it does not operate an enhanced share buy back scheme it supports the principal.

'After all, encouraging an investor in AIM VCTs to commit his money to the fund for another 5 years, we are guaranteeing access to funding to small companies for a further five years, Bedford said.

'That commitment to the scheme, which will span another economic cycle, fully warrants the income relief that comes with the investment.

"The government should not lose sight of this simple fact: an enhanced share buy vack scheme, operated correctly, does not offer anything to an investor that is not already available; it merely reduces the cost to the investor. That is to say than any VCT investor is free to sell their VCT shares after five years and re-invest in the same or another VCT and gain access to the income tax relief.'

The move comes as the Treasury opted to extend the CGT holiday for Seed Enterprise Investment Schemes to 50% for 2013-14 and 2014-15 as well.

'Whilst we are not operating an Enhanced Share Buy Back Scheme this year, we support the principal. After all, encouraging an investor in AIM VCTs to commit his money to the fund for another 5 years, we are guaranteeing access to funding to small companies for a further 5 years.  hat commitment to the scheme, which will span another economic cycle, fully warrants the income relief that comes with the investment,' Bedford said.

"The government should not lose sight of this simple fact: an Enhanced Share Buy Back scheme, operated correctly, does not offer anything to an investor that is not already available; it merely reduces the cost to the investor.  That is to say than any VCT investor is free to sell their VCT shares after 5 years and re-invest in the same or another VCT and gain access to the income tax relief.'