Albion Ventures, a UK venture capital investor, predicts that the venture capital trust market could double in size this tax year to GBP250m-GBP300m from GBP150m in the tax year 2008/2009.
Albion believes that VCTs have become more attractive due to a combination of factors.
VCTs, with 30 per cent income tax relief, tax free income and no capital gains on disposal, have become more attractive for higher rate tax payers following reduced tax reliefs on pensions and prospective rises in income tax.
Many banks are still reluctant to lend to smaller business meaning investors like Albion that do not use bank finance with their investments are able to select from a wider and therefore more attractive pool of potential investments.
History shows that investing at a depressed point in the economic cycle can lead to strong returns.
Patrick Reeve (pictured), managing partner at Albion Ventures, says: “Last year the VCT market was valued at GBP150m. I think GBP250m-300m is a healthy estimate as the 2009 Budget worked in our favour with the negative changes to pensions and income tax. Smaller unquoted companies are actively seeking alternatives to bank investment since many banks are still reluctant to lend.”
