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11 September 2003
 Technology venture capitalists have given a mixed reception to Gordon Brown's proposed reforms of the UK investment industry. In his pre-Budget speech, the Chancellor of the Exchequer outlined a series of initiatives that will affect technology companies and their investors. Research and development tax credits will be widened to include the direct costs of software. The Government could also raise the annual limit for investment in Venture Capital Trusts (VCTs) and Enterprise Investment Schemes to GBP 200,000, and increase tax relief for VCT investments. Brown said he will also extend tax relief for the cost of managing investments. Meanwhile, in a bid to help companies trying to raise up to GBP 2m in funding, Brown said he would follow the model of Small Business Investment Companies in the US by setting up a framework of incentives for small business investment. Simon Acland, a director of Quester, which runs several VCTs, described the overall package as "very positive news" which should make it easier to raise new VCT funds. "The increase to GBP 200,000 should attract rich individuals who previously might not have bothered with VCTs," he said. However, Rod Perry, director of 3i, struck a more cautious note. "Anything that will help seed and angel investors to get back into the market will be welcome. I'm not sure this will have the desired effect but it sounds promising." Not all the measures have been as welcome. Next year's Finance Bill is likely to cut back on tax advantages for dividends, as opposed to earned income, for owner-managers of small companies. "This will cause many would-be entrepreneurs to take the easy option and keep their heads down, stifling risk taking," said Graham Ransom, director of venture marketing at Interregnum. Julie Meyer, CEO of Ariadne Capital, also saw problems with the proposals. "The increase in R&D tax credits is a good step," she said, but pointed out, "These don't apply to services businesses, which in a centre like London they should." Julie Meyer is CEO of Ariadne Capital; julie@ariadnecapital.com New Media Age is the UK's leading weekly
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