IR 14                                             29 November 1994

                  VENTURE CAPITAL TRUSTS

The  Chancellor proposes in his Budget to make substantial changes,  
following consultation, to the  venture  capital trust  scheme  he  
announced in last year's  Budget.   The scheme  is designed to 
encourage individuals to invest  in unquoted trading companies 
through quoted venture  capital trusts.

The Chancellor's intention is to put in place an effective set  of  
measures to generate investment in  the  unquoted trading  company  
sector.  The aim, in particular,  is  to help  provide more funds 
where they are most needed, among dynamic, innovative growing 
businesses.

The measures will take effect from 6 April 1995.

                          DETAILS

1.   By buying quoted shares in a venture capital trust, a company   
broadly   similar  to   an   investment   trust, individuals will be 
able to invest in a spread of unquoted companies.

2.    The  principal features of the scheme are  described below  
(the  main changes resulting from the  consultation are highlighted):


The Investor

*  individuals  will be exempt from tax  on  dividends from  venture  
capital trusts and on capital  gains tax  when they dispose of shares
in the trusts  for investments of up to pounds 100,000 a year;

*  individuals  who subscribe for new ordinary  shares in  venture  
capital trusts will, in  addition,  be entitled to income tax relief 
at 20 per cent on  up to pounds 100,000 in  any tax year provided  that 
the shares  are  held for at least five  years.  They will  also be
able to defer capital gains tax on  a chargeable  gain which arises 
from the disposal  of any   assets  where  the  gain  is  reinvested 
by that  same subscription.  Where both reliefs  apply to a 
subscription an investor may therefore qualify for  total initial tax
relief of up to 60 per  cent (20  per  cent income tax relief and  40
per  cent capital gains tax deferral in the case of a  higher rate 
taxpayer).

The Venture Capital Trust

*  venture capital trusts must be quoted on the  Stock Exchange and, 
subject to the conditions below, will enjoy  the same exemption from 
corporation  tax  on capital gains as investment trusts;

*  at  least 70 per cent of the investments of venture capital  trusts 
will have to be in unquoted trading companies,  with not more than 15
per cent  in  any one company or group of companies;

*  venture  capital  trusts'investments in  unquoted trading companies
may include both equity and loans with  a  minimum term of five years
but  at  least 50  per  cent  of the investments must  be  in  new 
ordinary shares;

*  venture  capital trusts will initially have  up  to three  years  to 
meet  the 70  per  cent  unquoted trading  company  and  50 per cent 
ordinary  share requirements;   investments  in  unquoted   trading 
companies held by venture capital trusts at a  time when such 
companies become quoted may be treated as investments in unquoted 
trading companies for up to a further five years.

The Unquoted Trading Company

*  pounds 1 million in total in unquoted trading companies in any one year
towards the 70 per cent  unquoted trading  company requirement,  
provided  that  the gross   assets  of  the  companies do  not  
exceed pounds 10 million prior to the investment;

* unquoted trading companies will broadly be  defined as for the 
Enterprise Investment Scheme.


                     NOTES FOR EDITORS

1.    The Chancellor announced in his November 1993 Budget that he 
proposed, subject to consultation, to introduce  a scheme  for  a  
new  type of investment company  called  a venture capital trust.    

2.  A  consultative document was issued on 9 March  1994 
outlining the Government's proposals.

3.   The general response to the consultative document has been very 
positive.  The modifications to the proposals in the   consultative  
document  announced  today  take  full account of that response.

4.    The Exchequer cost of the scheme will depend on  the take-up   
and   the  success  of  the  investments   made.  Estimates  are  
highly uncertain. But on the  assumption that funds of around pounds 2.5 
billion are raised over the next three  years, estimated costs are 
popunds 150 million in the  tax year 1995-96, pounds 290 million in
1996-97 and pounds 240 million in 1997-98.

5.    The  Press  Releases issued today on the  Enterprise Investment
Scheme  (IR  15)   and  Capital   Gains   Tax Reinvestment  Relief   
(IR  16)  give  details  of   other measures to encourage investment 
in small business.