In the Budget 2012 papers, Mr Osborne states that the £1m limit will be removed from April 2012 except for companies in a partnership or a joint venture.

Qualifying company limits were increased to those with fewer than 250 employees and gross assets before investment of £15m.

Mr Osborne also said he would introduce a ‘disqualifying purpose test’ to exclude companies which have been set up for the purpose of accessing relief, acquisition of shares by a qualifying company in another company and exclude investment in some feed-in tariff businesses.

He hopes this will ensure VCTs and Enterprise Investment Schemes (EISs) are not used purely as a means of accessing tax relief.

Ian Sayers, director general of the Association of Investment Companies, said: “We are delighted that the Chancellor recognises the role that VCTs have to play in delivering increased economic growth and employment.

“The proposed role changes allow VCTs to invest in a wider range of companies which is a welcome boost to the sector and businesses desperately seeking finance.

“The Chancellor’s removal of the £1m limit on VCT investment in a single company will ensure more support to smaller businesses in the UK.”