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HMRC internal manual

Venture Capital Schemes Manual

Background to Venture Capital Schemes: aim of the venture capital schemes

The central aim of the venture capital schemes is to encourage equity investment in smaller unquoted trading companies. Small businesses generally, while often able to obtain modest loans or overdraft facilities, find larger amounts of capital difficult to raise - except for the largest and most solid undertakings. The exact range of this ‘equity gap’, as it is known, is open to dispute, but the existence of a funding gap of some kind is commonly agreed.

The EIS aims to attract investment from individuals (and, in the case of deferral relief under the scheme, from certain trustees). The VCT scheme encourages indirect investment by individuals, through the medium of a corporate vehicle similar to an investment trust.

The SEIS further supports investment in small, early stage companies, and complements the EIS and VCT scheme.