Recommendations & Conclusions
18 items
1
Conclusion
Nineteenth Report - Venture Capital
Accepted
Industry and government are aligned in their assessment that venture capital tax reliefs have had a positive impact on UK small businesses. They argue that the EIS, SEIS and VCTs are internationally competitive schemes that attract investors, which in turn has provided billions in financial support to start-ups and growing …
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Industry and government are aligned in their assessment that venture capital tax reliefs have had a positive impact on UK small businesses. They argue that the EIS, SEIS and VCTs are internationally competitive schemes that attract investors, which in turn has provided billions in financial support to start-ups and growing businesses since their inception. It is a consistently held view in our evidence that the removal of these schemes would negatively impact the UK venture capital market, materially limiting the support to entrepreneurs to help establish and grow their businesses. (Paragraph 16) Sunset clauses on venture capital reliefs
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Government response AI summary
The government agrees that EIS and VCT sunset clauses should be extended, and the Chancellor has publicly stated his firm intention to do so beyond April 2025. Further details will be provided at a future fiscal event.
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HM Treasury
2
Conclusion
Nineteenth Report - Venture Capital
Accepted
The Treasury continues to express the importance of the EIS and VCT schemes and a desire to extend their sunset clauses. The Chancellor has told us he does not see a barrier to doing so. However, despite our raising concerns repeatedly, the Treasury has not provided a clear plan and …
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The Treasury continues to express the importance of the EIS and VCT schemes and a desire to extend their sunset clauses. The Chancellor has told us he does not see a barrier to doing so. However, despite our raising concerns repeatedly, the Treasury has not provided a clear plan and timeframe for this extension. As the April 2025 deadline draws closer, this lack of firm action is damaging given that investment relies on the certainty of such support.
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Government response AI summary
The government agrees that EIS and VCT sunset clauses should be extended, and the Chancellor has publicly stated his firm intention to do so beyond April 2025. Further details will be provided at a future fiscal event.
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HM Treasury
3
Recommendation
Nineteenth Report - Venture Capital
Accepted
We recommend that HM Treasury extend the EIS and VCT sunset clauses beyond April 2025 at the earliest opportunity. HM Treasury should provide more certainty for founders and investors alike by announcing the length of the extension and a clear timeline for implementing it as soon as possible. (Paragraph 24) …
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We recommend that HM Treasury extend the EIS and VCT sunset clauses beyond April 2025 at the earliest opportunity. HM Treasury should provide more certainty for founders and investors alike by announcing the length of the extension and a clear timeline for implementing it as soon as possible. (Paragraph 24) Diversity in venture capital
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Government response AI summary
The government accepts the recommendation, stating the Chancellor has a firm intention to extend the EIS and VCT sunset clauses beyond April 2025, and will provide further details on the schemes at a future fiscal event to offer certainty.
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HM Treasury
4
Recommendation
Nineteenth Report - Venture Capital
Accepted in Part
The diversity statistics in the venture capital market are unacceptable. Venture capital firms are dominated overwhelmingly by white men, and the recipients of venture capital funding are even more unrepresentative of the wider UK population in terms of gender and ethnicity. While there has been some improvement, it is happening …
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The diversity statistics in the venture capital market are unacceptable. Venture capital firms are dominated overwhelmingly by white men, and the recipients of venture capital funding are even more unrepresentative of the wider UK population in terms of gender and ethnicity. While there has been some improvement, it is happening far too slowly, and affecting rapid change should be viewed as a priority by government and industry.
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Government response AI summary
The government agrees on the importance of a diverse and inclusive investment landscape and highlights existing initiatives like the Investing in Women Code. While acknowledging the importance of understanding demographic diversity, it rejects requiring businesses to disclose protected characteristics due to legal complexity and administrative …
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HM Treasury
5
Conclusion
Nineteenth Report - Venture Capital
Acknowledged
It is difficult to understand comprehensively the diversity breakdown of staffing and investment decisions across the venture capital market and its many small organisations. These firms do not have consistent policies on diversity or associated reporting, and a heavy emphasis on personal networks means that the true scale of the …
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It is difficult to understand comprehensively the diversity breakdown of staffing and investment decisions across the venture capital market and its many small organisations. These firms do not have consistent policies on diversity or associated reporting, and a heavy emphasis on personal networks means that the true scale of the problem remains unseen. The most urgent course of action is to improve the transparency and consistency of data. This will allow more informed action to be taken by Government, arm’s-length bodies and industry. Disclosure will also shine a light upon firms which are both best and worst in class, providing a reputational incentive to address diversity in the sector. (Paragraph 37) Venture Capital 27
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Government response AI summary
The government acknowledges the importance of improving transparency and consistency of diversity data in the venture capital market. It notes HMRC is reviewing ways to obtain additional demographic data and the Integrated Data Service may offer future information, but does not commit to making it …
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HM Treasury
6
Conclusion
Nineteenth Report - Venture Capital
Acknowledged
Venture capital tax reliefs are uses of public funds. It is only right and proper that their use is open to public scrutiny, including whether such funds are deployed fairly to women and people from ethnic minorities. At the moment, their use is unacceptably opaque.
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Venture capital tax reliefs are uses of public funds. It is only right and proper that their use is open to public scrutiny, including whether such funds are deployed fairly to women and people from ethnic minorities. At the moment, their use is unacceptably opaque.
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Government response AI summary
The government acknowledges the importance of public scrutiny of venture capital tax reliefs and the need to understand diversity in funding allocation. It states HMRC is reviewing ways to obtain additional demographic data and the Integrated Data Service may offer a future source of information, …
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HM Treasury
7
Recommendation
Nineteenth Report - Venture Capital
Rejected
HM Treasury should make provision of diversity statistics a requirement for eligibility to receive EIS, SEIS and VCT tax reliefs. Firms should be required to disclose the gender and ethnic breakdown of both recipients of their funding and their own staff. This should take effect from the renewal of the …
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HM Treasury should make provision of diversity statistics a requirement for eligibility to receive EIS, SEIS and VCT tax reliefs. Firms should be required to disclose the gender and ethnic breakdown of both recipients of their funding and their own staff. This should take effect from the renewal of the sunset clauses in April 2025.
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Government response AI summary
The government rejects making the provision of diversity statistics a requirement for eligibility to receive EIS, SEIS, and VCT tax reliefs, citing legal complexity and administrative burdens for small, young businesses. It notes HMRC is reviewing ways to obtain additional demographic data and the Integrated …
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HM Treasury
8
Conclusion
Nineteenth Report - Venture Capital
Acknowledged
We support the Women in Finance Charter and the Investing in Women Code. However, we are concerned that as a voluntary initiative with a low rate of take up, progress in improving diversity in venture capital is too slow and restricted to the more enlightened firms.
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We support the Women in Finance Charter and the Investing in Women Code. However, we are concerned that as a voluntary initiative with a low rate of take up, progress in improving diversity in venture capital is too slow and restricted to the more enlightened firms.
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Government response AI summary
The government agrees the Women in Finance Charter and Investing in Women Code are essential for improving diversity and highlights their positive impact and increasing signatory numbers. It notes a 'comply or explain' approach is already in place for British Business Bank applicants, but does …
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HM Treasury
9
Recommendation
Nineteenth Report - Venture Capital
Rejected
All relevant organisations in the venture capital industry ought to become signatories to both the Women in Finance Charter and Investing in Women Code, if they have not done so already. We have not determined that compulsory membership is appropriate at this time but recommend that HM Treasury and the …
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All relevant organisations in the venture capital industry ought to become signatories to both the Women in Finance Charter and Investing in Women Code, if they have not done so already. We have not determined that compulsory membership is appropriate at this time but recommend that HM Treasury and the BBB adopt a “comply or explain” policy with regards to both. Organisations ought to comply with the Charter or Code or explain why they are not, as a condition of EIS, SEIS and VCT eligibility. This approach will communicate to the market that the default expectation is that firms become signatories. Should diversity statistics and reporting not improve quickly enough, we will instead consider calling for compulsory membership.
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Government response AI summary
The government rejects making compliance with the Women in Finance Charter and Investing in Women Code a 'comply or explain' condition for EIS, SEIS, and VCT eligibility. It argues this approach would not achieve desired results and would place an undue burden on early-stage companies, …
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HM Treasury
10
Conclusion
Nineteenth Report - Venture Capital
Accepted
The British Business Bank has active funds designed to target specific market failures in venture capital, such as its regional funds. Representatives from the BBB have suggested that diversity-focused funds could theoretically be used in the same way, if there were provision set aside for them. The woeful diversity record …
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The British Business Bank has active funds designed to target specific market failures in venture capital, such as its regional funds. Representatives from the BBB have suggested that diversity-focused funds could theoretically be used in the same way, if there were provision set aside for them. The woeful diversity record of venture capital, which is failing to invest in high potential female and ethnic-minority- owned businesses, makes for a strong case for such intervention.
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Government response AI summary
The government agrees on the importance of promoting diversity in venture capital and highlights ongoing British Business Bank programmes that assess and support diverse fund managers and founders. It also notes DSIT's recent commitment of £12 million for a two-year Digital Growth Grant programme, launched …
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HM Treasury
11
Recommendation
Nineteenth Report - Venture Capital
Accepted
We recommend that the Government and British Business Bank consult on the creation of one or more venture capital funds with the specific purpose of promoting greater diversity in venture capital allocation. (Paragraph 55) Regional inequality in venture capital
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We recommend that the Government and British Business Bank consult on the creation of one or more venture capital funds with the specific purpose of promoting greater diversity in venture capital allocation. (Paragraph 55) Regional inequality in venture capital
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Government response AI summary
The government acknowledges the importance of diversity and highlights existing British Business Bank programs that support diverse founders and fund managers, as well as new DSIT funding for underrepresented entrepreneurs, but does not commit to consulting on creating new dedicated diversity-focused venture capital funds.
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HM Treasury
12
Conclusion
Nineteenth Report - Venture Capital
Accepted
The evidence we have received suggests that venture capital investment is concentrated in London, strongly disproportionately to its share of the UK SME population. This means that throughout most of the UK regions and nations, opportunities for investment in high-growth businesses are more limited than they ought to be. This …
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The evidence we have received suggests that venture capital investment is concentrated in London, strongly disproportionately to its share of the UK SME population. This means that throughout most of the UK regions and nations, opportunities for investment in high-growth businesses are more limited than they ought to be. This may be undercutting the potential for economic growth across the UK regions and nations.
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Government response AI summary
The government agrees that regional businesses should not be disadvantaged and acknowledges the concentration of venture capital in London. It highlights several existing British Business Bank programmes, such as the Regional Angels Programme and regional investment funds, specifically designed to address regional imbalances in access …
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HM Treasury
13
Conclusion
Nineteenth Report - Venture Capital
Acknowledged
The 7 and 10 year company age limits on EIS and VCTs serve to disadvantage businesses outside prime investment zones in London and the “Golden Triangle”. Firms from other regions can take longer to become established and therefore may 28 Venture Capital miss out on venture capital support through no …
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The 7 and 10 year company age limits on EIS and VCTs serve to disadvantage businesses outside prime investment zones in London and the “Golden Triangle”. Firms from other regions can take longer to become established and therefore may 28 Venture Capital miss out on venture capital support through no fault of their own. This risks holding back economic growth and innovation in areas that would most benefit from it.
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Government response AI summary
The government agrees that regional businesses should not be disadvantaged and highlights existing British Business Bank programs to address regional imbalances. However, it defends the current EIS and VCT age limits, stating that extending them would displace investment from smaller companies and is not the …
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HM Treasury
14
Recommendation
Nineteenth Report - Venture Capital
Rejected
The Government should extend the 7 and 10 year company age limits for support through the EIS and VCT schemes. HM Treasury should consult on revised limits, with the objective of not disadvantaging regional businesses. This revised limit should take effect from the renewal of the sunset clauses in April …
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The Government should extend the 7 and 10 year company age limits for support through the EIS and VCT schemes. HM Treasury should consult on revised limits, with the objective of not disadvantaging regional businesses. This revised limit should take effect from the renewal of the sunset clauses in April 2025. (Paragraph 68) Scale-up capital
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Government response AI summary
The government rejects extending the 7 and 10-year company age limits for EIS and VCT schemes, arguing it would risk displacing investment from smaller companies and is not an appropriate way to address regional imbalances, despite agreeing that regional businesses should not be disadvantaged.
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HM Treasury
15
Conclusion
Nineteenth Report - Venture Capital
Acknowledged
The funding limits on tax-beneficial venture capital funding through the EIS and VCTs schemes limit their utility in helping companies grow and scale-up in today’s economy. Altering these limits presents an opportunity to support domestic business growth through established policy routes.
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The funding limits on tax-beneficial venture capital funding through the EIS and VCTs schemes limit their utility in helping companies grow and scale-up in today’s economy. Altering these limits presents an opportunity to support domestic business growth through established policy routes.
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Government response AI summary
The government acknowledges the importance of supporting scale-up businesses and highlights existing initiatives like British Patient Capital, but implicitly rejects altering EIS and VCT funding limits to target scale-ups, arguing it risks undermining the schemes' policy rationale and displacing investment from their intended beneficiaries.
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HM Treasury
16
Recommendation
Nineteenth Report - Venture Capital
Rejected
HM Treasury should consult on higher funding limits on the EIS and VCT schemes with the objective of better supporting scale-up businesses. These revised limits should take effect from the renewal of the sunset clauses in April 2025.
Government response AI summary
The government acknowledges the importance of supporting scale-up businesses and highlights existing support through the British Business Bank and British Patient Capital. However, it rejects consulting on higher funding limits for EIS and VCT schemes, arguing that such revisions would risk undermining policy rationale, displacing …
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HM Treasury
17
Conclusion
Nineteenth Report - Venture Capital
Not Addressed
Our evidence suggests that UK pension funds may be an untapped source for a deeper domestic capital market more inclined to risk investment in high-potential businesses. We welcome the Government’s announcement of work on pension fund consolidation in the autumn. We will scrutinise the details of those proposals closely. Any …
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Our evidence suggests that UK pension funds may be an untapped source for a deeper domestic capital market more inclined to risk investment in high-potential businesses. We welcome the Government’s announcement of work on pension fund consolidation in the autumn. We will scrutinise the details of those proposals closely. Any change must pay due regard to the balance between risk and reward for pension investors. We also look forward to the forthcoming consultation on the pooling of Local Government Pension Scheme assets and encourage the government to progress this work with urgency.
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Government response AI summary
The government's response is boilerplate text detailing existing support for scale-up businesses through the British Business Bank, British Patient Capital, and EIS/VCT schemes. It does not address the recommendation regarding pension funds as an untapped source of capital or the government's work on pension fund …
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HM Treasury
18
Recommendation
Nineteenth Report - Venture Capital
Accepted
Access to UK domestic capital has been a barrier for British businesses wishing to grow their operations beyond early venture capital funding stages. The US has deeper pools of capital for venture capital investment, and this has often led to UK firms looking overseas for funding. It is imperative that …
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Access to UK domestic capital has been a barrier for British businesses wishing to grow their operations beyond early venture capital funding stages. The US has deeper pools of capital for venture capital investment, and this has often led to UK firms looking overseas for funding. It is imperative that the UK makes best use of its pools of capital to make UK ownership an attractive option for the innovative and dynamic businesses which are the future of a successful UK economy. (Paragraph 87) Venture Capital 29
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Government response AI summary
The government acknowledges the importance of supporting scale-up businesses and details existing initiatives like the British Business Bank and British Patient Capital. It states that current EIS and VCT schemes are kept under review but argues against revising funding limits to target scale-ups, citing risks …
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HM Treasury