POLITICAL COMMENT: MP urges Labour Government to reverse tax relief cut to help UK businesses scale up

Havant MP Alan Mak has called on the Labour Government to reverse a tax relief cut to help UK businesses scale up.

Havant MP Alan Mak has urged the Labour Government to reverse a tax relief cut to help UK businesses scale up | Alan Mak

placeholder image — Havant MP Alan Mak has urged the Labour Government to reverse a tax relief cut to help UK businesses scale up | Alan Mak

He has written to Chancellor John Healey urging him to restore upfront Venture Capital Trust income tax relief from 20 per cent to 30 per cent in the Autumn Budget on 28 October.

Mr Mak's letter has also been signed by cross-party MPs, including former Ministers, and Chairs of Britain's leading VCT Boards.

He said VCTs needed to be strengthened, not weakened, as they were one of the UK's most successful vehicles for backing high-growth businesses.

Mr Mak explained: "Since their creation in 1994, VCTs have played a central role in Britain's venture capital ecosystem.

"They mobilise private savings into innovative UK companies, support entrepreneurs through the difficult scale-up stage, and help firms access the patient capital they need to grow."

VCTs support more than 1,100 businesses, with £6.6bn of funds under management.

Since 2016, VCT-backed companies have delivered £18.5bn in revenues, generated £3.9bn in exports and supported businesses employing more than 100,000 people across every region of the UK.

Mr Mak said that the last time the rate of relief was reduced, from 40 per cent to 30 per cent in 2006-7, VCT fundraising fell by 65 per cent year-on-year, taking 16 years to recover its previous peak.

Modelling from the Venture Capital Trust Association suggests the latest cut, which came into effect in April, could reduce fundraising by 20 to 40 per cent.

Mr Mak said that making it harder for high-growth firms in AI, life sciences, defence, fintech and advanced manufacturing to raise capital in the UK could force them to go abroad.

He added: "Ahead of the Budget I'm calling on Labour to restore the upfront tax relief for VCTs to 30 per cent to back Britain's high growth businesses so we can build a ScaleUp Nation: a country that does not just start world-class businesses, but allows them to scale and remain here."