VCM10020 - Introduction: Aim of the venture capital schemes

The central aim of the venture capital schemes is to encourage investment in small 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), while the CVS aims to promote investment by companies and thereby to encourage corporate venturing relationships. The VCT scheme encourages indirect investment by individuals, through the medium of a corporate vehicle similar to an investment trust.