A report commissioned by the UK department HM Revenue & Customs into the use and impact of the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) shows that income tax relief is a key driver in investments.

Both EIS and VCTs offer a range of tax reliefs for private individuals investing in unquoted companies. EIS provides these reliefs mainly for direct investing while VCTs links with those investing indirectly.

The report, carried out by market research company Ipsos Mori, found that 79% of investors listed income tax relief as either very important or essential for their investments.

Ipsos did not just look at quantitative data. A parallel qualitative assessment found that entrepreneurship and philanthropy were also factors in some investment decisions.

The report shows that the two schemes have provided funding in situations where a company may not have been able to secure it previously. A total of 62% of companies that received investment through one of the schemes reported that its proposed investment would either definitely not (35%) or probably not (28%) have taken place without the tax-advantaged venture capital schemes.

The data was compiled by Ipsos following surveys with 628 investee companies and 546 investors in 2014. Ipsos also held in-depth interviews with seven investees and eight investors who took part in the surveys, as well as a further five VCT fund managers who had not taken part in the surveys.