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Finance (No. 2) Bill

As the hon. Member for Fareham (Mr. Hoban) said, the amendment probes the notion of introducing inheritance tax business property relief for shares in venture capital trusts. It aims, too, to introduce a second tranche of income tax relief for investments in VCTs on the sixth anniversary of an individual holding that investment, but neither of those proposals would benefit the VCT scheme. A second tranche of income tax relief would not encourage any additional investment in small growth companies, and it would not contribute anything to the objectives of the VCT scheme. The hon. Gentleman will accept that his amendment involves a substantial deadweight cost, as it would provide an unnecessary incentive to investors in VCTs that were performing well. More worryingly, it would create an incentive for individuals to maintain their shareholdings in poor-performing VCTs, instead of exiting the investment for solid commercial reasons at the appropriate time. The amendment would not restrict relief to new shares, but it would enable existing investors to claim additional relief without contributing further funds—a cost that the Government cannot justify. On the inheritance tax proposal, income tax relief is the best incentive for investments in VCTs, as it is available and attractive to the widest possible pool of investors—something that cannot be said of the inheritance tax relief proposed by the amendment.Finally, on inheritance tax, VCT shares are quoted shares listed on the main market of the London stock exchange. Quoted shares currently qualify for inheritance tax business property relief in the exceptional circumstance that the quoted company is still in family control. That is clearly not compatible with VCT schemes, so we do not accept that there is a case for an extension of business property relief to the VCT scheme. On that basis, I hope that the hon. Gentleman will withdraw his amendment but, if he does not do so, I urge my hon. Friends to vote against it.