Venture capital incentive offer

INVESTORS could be given PEP-style tax breaks on investments of up to pounds 100,000 in the new venture capital investment trusts announced in the last Budget.

Inland Revenue proposals published this week envisage that the new trusts will be available in a year. The investment would be free from capital gains tax and dividends free from income tax.

The maximum investment in a personal equity plan is pounds 9,000 per investor per year - pounds 6,000 plus pounds 3,000 in a single- company PEP.

Managers of venture capital trusts will claim back income tax from the Revenue on behalf of investors, in the same way that PEPs operate.

To qualify for the tax incentives, the trust must have at least 80 per cent of its funds invested in unquoted companies.

The Revenue proposes that the maximum a fund can invest in any one company in one year is pounds 1m. The size of companies trusts can invest in will be limited to pounds 10m in assets.

James Nelson, managing director of Foreign & Colonial Ventures, one of the biggest venture capital specialists, said the concepts outlined by the Government were on the whole good.

But he thought the proposed investment limits of pounds 1m and pounds 10m might be a bit low.

He also said it was imperative that existing qualifying venture capital investment trusts be brought within the same regime.

'All existing funds should qualify, otherwise you will end up with a two-tier market.'