VCTs are a form of publicly traded private equity, comparable to investment trusts in the UK or business development companies in the United States.
They were introduced by the Conservative government in the Finance Act 1995[1] to encourage investment into new UK businesses.
[7] After the level of income tax relief was reduced to 30% in April 2006, at which point the required minimum holding period was also increased to 5 years, the amounts raised by VCTs in the tax year did not exceed £500 million for a decade.
[9] In 2020/21 £685 million was raised, 11% higher than the previous year, although the overall capacity of VCT share offers was 7.5% lower, reflecting uncertainty over the economic impact of the COVID-19 pandemic.
The year was notable for fast selling offers including Mobeus VCTs, which raised £35 million within a day of opening.
[11] In 2022/23 the backdrop in the UK economy was one of economic uncertainty, with high inflation, political instability and the ongoing Russian invasion of Ukraine.
[13] Around 66% of the difference is accounted for by the £131 million less raised by a single trust, Octopus Titan VCT.