The extension was announced in its response to the Treasury Committee's Venture Capital report from in the summer, stating it "recognises the need to provide certainty to founders and investors", adding it would provide "further details on the schemes beyond 2025 at a future fiscal event".
Chancellor of the Exchequer Jeremy Hunt had previously signalled his agreement with the committee to continue the scheme in previous correspondence, but this is the first time he has committed to an extension.
MPs call for Treasury to set out clear plans on EIS and VCT extension
In a letter sent to to the financial and economic secretaries to the Treasury today (20 October), the chair of the committee Harriett Baldwin thanked them for their responses and said the committee was "pleased to hear that HM Treasury shares our overall priorities with regard to the UK venture capital market and look forward to the development of your policy in the coming months".
She addressed the lack of a formal date for the extension however, and "urge you to not delay providing certainty to the market".
The Treasury disputed several other recommendations put forward in the committee's summer report, including bringing in a provision to make diversity statistics s a requirement for eligibility to receive EIS, SEIS and VCT tax reliefs.
The committee had recommended that "firms should be required to disclose the gender and ethnic breakdown of both recipients of their funding and their own staff. This should take effect from the renewal of the sunset clauses in April 2025."
The Treasury "agreed that a diverse and inclusive business ecosystem is good for customers, entrepreneurs, businesses, and investors", and while it supported the intention behind the recommendation said it did not agree that the provision should be added to the existing policy", arguing that this would be "both difficult to implement within the current structure of the schemes and would not deliver the intended outcome".
Baldwin said she was "pleased that the Treasury shares our concerns regarding the low level of regional, ethnic and gender diversity within the Venture Capital Market. However, despite sharing the opinion it should be a priority, it is not clear how they plan to address it as they have rejected our recommendations".
Value of UK venture capital funding deals halves in 2023
Additionally, the Hunt's office said it "remains to be convinced" on the committee's call for the adoption of a "'comply or explain policy'", regarding signing the Women in Finance Charter and the Investing in Women code to receive tax reliefs, claiming it was "not suitable for the individual investors who claim the tax relief and may not be applicable to the start-ups and SMEs that receive the funding if they operate in industries outside".
It said: "Introducing a ‘comply or explain' policy on EIS, SEIS and VC eligibility would not achieve the desired results and would place an undue burden on the early-stage companies who benefit from these schemes."
In the report, the government argued that a scheme of this nature was already in place as the British Business Bank already ask fund managers whether they are signatories of the Investing in Women Code. If they are not, then the British Business Bank requests that these applicants either join the Code or provide a reason why they do not wish to become a signatory.
The Treasury reiterated its claim it was "committed to ensuring that the UK is the best place in the world to start a business, regardless of gender".
The government also pushed back on the proposal to extend the EIS and VCT company age limits, which the committee said it put forward as a way to tackle the reduce regional inequality within the investment landscape.
The Treasury said it could "risk displacing investment away from the smaller companies", a claim Baldwin challenged in her latest letter.
"As the current age limit is seven years, this effectively locks out some regional firms from accessing investment on a level playing field. Regional targeted funds under the British Business Bank will not be enough alone whilst the current rules remain in place. The government must come forward with a solution to this imbalance in provision, including reconsidering changing the age at which support can be provided, even on a regional basis," she said.