The Association of Investment Companies (AIC) has welcomed an announcement from the government that HM Treasury will postpone the UK’s introduction of new limits for Venture Capital Trusts.

These rules will cap at £2 million the amount which can be invested in a small business by schemes such as VCTs, EIS and Seed Enterprise Investment Scheme in any 12-month period. The decision removes the threat that VCTs making investments in the next few months might automatically lose their tax status if they fall foul of this provision.

Details of the new rules were confirmed last Thursday with the publication of the Finance Bill. However, the AIC was concerned that the timing of the new provisions did not give the venture capital sector time to adapt its investment processes and plan for the change.

The AIC raised this issue with HM Treasury as a matter of urgency as the original intention was for the new provisions to apply to all investments made from 6 April 2012.

Ian Sayers, director general at the AIC, said: “The Treasury has quickly recognised that introducing these rules at short notice would have created problems for VCTs seeking to invest in small businesses in the next few months. It agreed that this would be unhelpful at a time when UK SMEs are struggling to find reliable sources of funds.

“The government’s response to industry concerns shows its commitment to supporting the venture capital sector and will provide more time for small businesses and investors to plan how they will deal with the limit.

“The limit itself is also currently under review and the government is pushing for it be raised to £5 million. Such an increase is dependent on the approval of the European Commission. These negotiations are, by their nature, complicated and time-consuming. Nevertheless, we are confident that the government is committed to this process and we very much hope this increase can be achieved. Increasing the limit would provide additional support to small businesses.”