Businesses supported by VCTs are typically highly productive and drivers of local growth. The potential economic benefit of VCT funding is currently not being fully exploited due to restrictions surrounding time limits, funding levels and bureaucratic delays during HMRC’s advance assurance process.
An increase in the age of businesses that VCTs can provide finance to, alongside an increase in the size of investment permitted, would do much to encourage higher rates of productivity and more scale ups across the UK. There is currently a funding shortage in rounds between £5 million to £50 million and for companies with a market capitalisation of between £15 million and £100 million. These companies are typically 10 or more years old and are not eligible for VCT investment.
The bureaucratic delays at HMRC are severely undermining the ability of high growth small businesses to access the finance they need to scale up. The current target for HMRC to process advance assurance applications, as announced in the 2017 Budget is 15 days, yet the average length of time for clearance currently stands at 64 days. Due to the draconian penalties regime in place for investments found to be non-qualifying, businesses cannot receive the funding until the investment has been formally approved by HMRC.
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