Source · Select Committees · Treasury Committee
Nineteenth Report - Venture Capital
Treasury Committee
HC 134
Published 24 July 2023
Conclusions (5)
5
Conclusion
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 …
Government Response 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 a requirement for EIS, SEIS, and VCT eligibility.
6
Conclusion
Acknowledged
Para 40
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.
Government Response 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, but it does not commit to making diversity data a requirement for EIS, SEIS, and VCT eligibility.
8
Conclusion
Acknowledged
Para 49
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.
Government Response 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 not commit to extending this to EIS, SEIS, and VCT eligibility.
13
Conclusion
Acknowledged
Para 67
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 …
Government Response 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 appropriate policy to address regional imbalances.
15
Conclusion
Acknowledged
Para 76
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.
Government Response 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.