In yesterday's Budget, the Chancellor announced a reduction in tax relief for investments in Venture Capital Trusts (VCTs).
Gordon Brown indicated that VCT tax relief would fall from 40% to 30% for any amount invested, up to a maximum annual limit of £200,000. Funds will have to remain invested in the VCTs for five years in order to qualify for relief, an increase on the current timeframe of three years.
As the measure comes into force on 6 April, there is likely to be an increase in VCT investment over the next two weeks as investors rush to place their funds before the new rules start to apply.
In the longer term, the measures are likely to force VCTs to invest in smaller companies.
