Venture Capital Trusts

This is intended for guidance only and does not attempt comprehensive or detailed coverage of the rules of the Venture Capital Trust (VCT) scheme. The guidance reflects HM Revenue & Customs' understanding of the law in force at the time of publication. The statements in the guidance do not affect any right of appeal about any tax liability.

Venture Capital Trusts (VCTs)

This is a brief account of

It also provides

Introduction

The Venture Capital Trust scheme started on 6 April 1995. It is designed to encourage individuals to invest indirectly in a range of small higher-risk trading companies whose shares and securities are not listed on a recognised stock exchange, by investing through Venture Capital Trusts (VCTs). So, if you invest in a VCT, you spread the investment risk over a number of companies.

VCTs are companies listed on the London Stock Exchange, and are similar to investment trusts. They are run by fund managers who are usually members of larger investment groups. Investors can subscribe for, or buy, shares in a VCT, which invests in trading companies, providing them with funds to help them develop and grow. VCTs realise their investments and make new ones from time to time.

VCTs must be approved by us for the purpose of the scheme. We give our approval if they meet certain conditions. If you invest in them you may be entitled to various income tax and capital gains tax reliefs, and VCTs are exempt from corporation tax on any gains arising on the disposal of their investments.

Our approval of a VCT means that it currently satisfies our requirements enabling investors to qualify for certain tax reliefs. It does not guarantee the safety or success of any investments you make in a VCT. We strongly advise you to get advice from a professional adviser before you decide whether or not to invest in a VCT.

Top

Tax reliefs available for investors

Tax reliefs are only available to individuals aged 18 years or over and not to trustees, companies or others who invest in VCTs.

Income tax reliefs.

  • exemption from income tax on dividends from ordinary shares in VCTs ('dividend relief'), and
  • 'income tax relief' at the rate of 30% of the amount subscribed for shares issued in the tax year 2006/07 and onwards (for subscriptions for shares issued in previous tax years the rate is 40%). The shares must be new ordinary shares and must not carry any preferential rights or rights of redemption at any time in the period of five years (three years if the shares were issued before 6 April 2006) beginning with their date of issue. You can get this relief for the tax year in which these 'eligible shares' were issued, provided that you subscribed for the shares on your own behalf, the shares were issued to you, and you hold them for at least five years (three years if the shares were issued before 6 April 2006).
  • The income tax relief at 30% is available to be set against any income tax liability that is due, whether at the lower, basic or higher rate.


Capital gains tax (CGT) reliefs.

There are two Capital Gains Tax reliefs:

  • you may not have to pay Capital Gains Tax on any gain you make when you dispose of your VCT shares. (This is called disposal relief).
  • if you invested in shares issued before 6 April 2004, you may be able to treat gains arising on disposals around the time your VCT shares are issued as postponed to a later year. (This is called deferral relief.) You must have received income tax relief on the investment in VCT shares and the VCT shares must be issued in the period beginning 12 months before and ending 12 months after the gain arises. Deferral relief is not available in respect of investments in shares issued after 5 April 2004.

You can get two of the reliefs, dividend relief and CGT exemption, for both newly issued shares and second-hand shares acquired, for example, through the Stock Exchange. But income tax relief (and, where the shares were issued before 6 April 2004, deferral relief) can be claimed only if you subscribe for new shares.

Top

You can get income tax relief for a tax year if shares in VCTs for which you subscribed up to a maximum of £200,000 are issued to you in the year (£100,000 for tax years before 2004/05). You can also get deferral relief if you were issued with shares in VCTs in tax years before 2004/05, up to a maximum of £100,000 per tax year, provided that you received income tax relief in respect of those shares. A tax year begins on 6 April in one year and ends on the following 5 April. You can claim the reliefs, where applicable, from the Tax Office which deals with your tax affairs. To claim deferral relief you must be resident or ordinarily resident in the United Kingdom both when you make the disposal giving rise to the gain and when you were issued with shares in the VCT.

In some cases you will not be entitled to income tax relief for a subscription for VCT shares. For example if a loan is made to you or an associate of yours (such as a business partner, your spouse, or a close relative) on terms which are linked to the share subscription.

You can find information about the circumstances in which reliefs can be lost or withdrawn.

How, and when, can I claim income tax relief when I invest in a VCT?

You should claim the relief in your tax return for the year in which the shares were issued. However, you do not necessarily need to wait until you send in your tax return to get the benefit of the relief. You can do this once the shares which qualify for the relief have been issued to you by contacting your Tax Office.

If you pay tax under PAYE, and want the relief immediately, you can ask your Tax Office to adjust your tax code.

If you do not pay tax under PAYE, but are due to make Self Assessment payments on account, you can, subject to certain conditions, make a claim to reduce these. To receive the relief this way, please contact your Tax Office and ask them to tell you the qualifying conditions for making a claim to reduce payments on account and explain how to make a claim. When making your claim, you must bear in mind that we will charge you interest or penalties or both if your claim proves to be excessive.

Whether or not you claim relief in either of these ways, you must enter details of your investment on your tax return for the tax year in which your VCT shares were issued. The amount of relief you get cannot exceed your income tax liability for that year. For example: if you subscribed £20,000 for shares issued in the tax year 2006-07 your maximum income tax relief would be £6,000. However, if your income tax liability in that year before any income tax relief is obtained in respect of your VCT investment is £5,000, that is the relief you will receive. The difference of £1,000 cannot be set off against the income tax liability of any other year.

The VCT will provide you with a certificate when you are issued with qualifying shares. Your tax office may ask you for this certificate when you claim income tax relief.

Can I use a nominee to hold VCT shares?

Yes, but to get income tax relief you must have subscribed for them in your own name.

Top

How do I defer a capital gain in respect of VCT shares issued to me before 6 April 2004?

You must tell your Tax Office that you want to claim deferral relief.

You must specify

  • the amount of the chargeable gain that expenditure on the shares is to be set against
  • the date the chargeable gain arose on (if you have made two or more gains on the same day you will need to specify which is the relevant one), and
  • if expenditure on the shares is to be set against two or more gains, the amount of that expenditure which is to be set against each gain.

If the chargeable gain arose on the disposal of an asset, you will also need to give us details of the asset.

You should not send your claim to your Tax Office before you send us your tax return giving details of the gain included in the claim. You can send us your claim either with that tax return or later. However, the claim must be made by the deadline of five years from the 31 January next following the end of the tax year in which the gain to be deferred arose or that in which the VCT shares were issued, if later.

How much deferral relief can I claim in respect of VCT shares issued before 6 April 2004?

The maximum amount of deferral relief you can claim for any tax year is the amount you subscribe for eligible shares in VCTs that are issued to you in the year (up to a maximum of £100,000). You can claim this amount if you receive income tax relief for the investment, even if you cannot claim the full amount of income tax relief because you do not have a sufficiently high income tax liability (see example below).

You cannot get deferral relief if you have no income tax liability for the tax year in which the VCT shares were issued and cannot therefore benefit from VCT income tax relief.

You can defer a gain against any investment in eligible shares (see Deferral Relief) in a VCT issued to you during the two-year period beginning twelve months before the date the gain arose. So you can defer a gain of more than £100,000 by investing in eligible shares issued in different tax years up to the maximum available in each year.

Top

Example

You subscribed £100,000 for eligible shares in a VCT which were issued in the tax year 2002/03, and for which you are entitled to claim income tax relief. So you can claim income tax relief up to £100,000 x 20% = £20,000. Your income tax liability for 2002/03 is not high enough for you to get this amount, however, and you can only claim £12,000 relief.
You can, however, claim deferral relief up to the full subscription of £100,000 against any gains made within twelve months before or after the date on which the shares were issued. (see 'Tax reliefs available for investors').

Top

How does deferral relief interact with the CGT annual exempt amount and taper relief?

You can use the annual exempt amount (if you have not used it elsewhere) to cover all or part of your gain before using deferral relief. If you defer a chargeable gain against a VCT investment, we will not take account of any CGT taper relief that would otherwise be available to reduce the amount of the gain which is chargeable to tax. Taper relief may be available when the deferred gain is revived in a later year (see attached link for further guidance to the Venture Capital Manual (VCM) VCM68160 Deferral gain).

The amount of taper relief due on that later occasion will be calculated by reference to the qualifying period for which you held the original asset. The period during which the gain was deferred for does not count for taper relief purposes.

(You can find more information on capital gains tax in our booklet : CGT1 'Capital Gain Tax. An Introduction (PDF 1.1MB).

If I acquire more than £200,000 worth of shares in VCTs in the same tax year, which of the shares can qualify for which of the tax reliefs?

Dividend relief that you receive for ordinary shares in VCTs (dividend relief), and CGT exemption on their subsequent disposal, are given only for shares you acquire up to the 'permitted maximum' of £200,000 in the tax year (£100,000 for tax years before 2004/05).

Shares acquired earlier in the tax year count first. Ordinary shares of different classes or in different VCTs acquired on the same day are identified on a proportionate basis. It does not matter whether you subscribed for the shares or acquired them by purchase or other means, or whether you also get income tax relief for any of those shares.

You can get income tax relief only for the first £200,000 worth of 'eligible shares' (see 'Tax reliefs available for investors') you subscribe for and which are issued to you in the tax year.

This means that the shares you obtain income tax relief on, if any, may not be the same as those you receive dividend relief on and which qualify for CGT exemption.

Top

Example

On 1 May 2004, £80,000 worth of eligible shares in a VCT you had subscribed for were issued to you. On 1 June 2004 you bought £100,000 worth of second-hand ordinary shares in a VCT, and £140,000 worth of eligible shares in a VCT you had subscribed for were issued to you. You were over the age of 18 on 1 May 2004.

You get dividend relief and CGT exemption on

  • all the £80,000 worth of the shares acquired on 1 May, and
  • £120,000 worth of the shares acquired on 1 June, divided between the holdings in the proportions

100,000/240,000 x 120,000 = 50,000

140,000/240,000 x 120,000 = 70,000

So, £50,000 worth of the second-hand shares, and £70,000 worth of the eligible shares, attract the reliefs.

You can get income tax relief and deferral relief for

  • all the £80,000 worth of shares acquired on 1 May, and
  • £120,000 worth of the eligible shares acquired on 1 June.

Are my gains on selling shares in a VCT exempt from CGT?

There will be no chargeable gain (or allowable loss) for CGT purposes on selling ordinary shares in a VCT provided

  • you acquired the shares within the permitted maximum for the tax year in question
  • the VCT was a approved as a VCT both when the shares were acquired and when they were sold, and
  • you are aged 18 or over when selling the shares.

Top

How do I sell my shares?

Because the ordinary shares of a VCT are listed in the Official List of the London Stock Exchange, you can sell them in the same way as any other listed investment.

Conditions for HMRC approval of VCTs

To get the tax reliefs offered by the VCT scheme, you must invest in a company which has been approved as a VCT. The main conditions a company must satisfy for us to approve it as a VCT are that

  • its income for its most recent accounting period must have been wholly or mainly from shares or securities
  • throughout that period, at least 70% (by value) of its investments must have been 'qualifying holdings', that is shares or securities in companies which meet the conditions of the scheme ( 'The companies VCTs invest in') and which were issued to the company and have been held by it ever since. From 6 April 2007 any money that a VCT holds (or is held on its behalf) will be treated as an investment for the purpose of these tests.
  • throughout that period, at least 30% (by value) of its qualifying holdings must have been holdings of ordinary shares with no preferential rights to dividends or to the company's assets on its winding up, and no right to be redeemed
  • at no time in that period must its holding in any company have represented more than 15% (by value) of its investments
  • throughout that period, its ordinary shares must have been listed on the London Stock Exchange
  • it must not have retained more than 15% of the income it derived in that period from shares or securities.

To retain approval, the company must continue to satisfy all the conditions during each later accounting period. The consequences for an investor of the withdrawal of approval are explained in the attached link 'Withdrawal of a company's approval as a VCT'.

Can companies be approved as VCTs if any of the conditions are not met?

We can provisionally approve a company which has not yet met the conditions but satisfies us that it intends to meet them within the time allowed. In such cases, the 70% and 30% conditions must be met for an accounting period beginning not more than three years after the date of provisional approval and must continue to be met for subsequent accounting periods. The other conditions must be met for the current or next accounting period and must continue to be met for subsequent accounting periods.

We will withdraw provisional approval if the company fails to meet the conditions within the specified periods.

Top

What happens if a VCT makes more than one issue of shares?

If a VCT makes more than one issue of shares we can temporarily disregard the money raised by the second and subsequent issues when we determine whether the 70% and 30% conditions for approval are satisfied.

The money raised by an issue of shares must, however, be taken into account for the purposes of determining whether these conditions are satisfied for an accounting period ending within three years after the shares in question were issued and for all subsequent accounting periods.

Loss or withdrawal of tax reliefs

The tax reliefs you get by investing in a VCT can be lost or withdrawn in certain circumstances. A deferred gain can be revived and you can lose your income tax relief if you dispose of your VCT shares. Shares will no longer attract any of the tax reliefs offered by the scheme if the company loses its VCT approval. There is more detail below.

If something happens which means that you lose your entitlement to income tax relief, you must tell your Tax Office within 60 days of coming to know of it.

Disposal of VCT Shares

Deferral relief

If you sell or otherwise dispose of your VCT shares at any time, except where you transfer the shares to your spouse while living together as husband and wife (a 'transfer between spouses'), any gain you have deferred in respect of the shares will be revived in the tax year that you dispose of the VCT shares. If there has been a transfer between spouses, then we will treat your spouse for deferral relief purposes as though he or she had subscribed for the shares in the first place.

This means that, for example, if your spouse then disposes of the shares (other than via another transfer between spouses) he or she will be liable for any gain.

You can use your annual exempt amount for the tax year the deferred gain is revived in to cover all or part of the revived gain. Or, you can defer the revived gain by setting it against a further qualifying investment under the Enterprise Investment Scheme (EIS). The revived gain may be eligible for taper relief. The amount of taper relief will be based on the qualifying period up to the disposal of the asset that gave rise to the original gain.

Top

Income tax relief

If you sell or otherwise dispose of your shares within five years of them being issued to you (three years for shares issued before 6 April 2006) you will have to repay some or all of the income tax relief you get for the shares you dispose of. This does not apply if the disposal is a transfer between spouses.

If there has been a transfer between spouses of shares for which income tax relief was obtained, the recipient is treated in relation to any subsequent disposal or other event as though he or she had subscribed for the shares in the first place. This means that, for example, if the spouse to whom the shares were transferred disposes of them within five years after they were issued, other than via another transfer between spouses, we will withdraw the income tax relief from the person who makes the disposal.

How much income tax relief will be withdrawn on a disposal within 5 years of the shares being issued?

If you dispose of shares by way of 'a bargain made at arm's length' (a normal commercial transaction between unconnected persons), the amount of income tax relief we will withdraw is the smaller of

  • the amount of relief you got for the shares you disposed of, and
  • for shares issued after 6 April 2006, 30% of the amount you received for the shares that you disposed of, or;
  • for shares issued between 6 April 2004 and 5 April 2006 (inclusive), 40% (the rate of relief for shares issued in the tax years 2004/05 and 2005/06) of the amount you received for the shares that you disposed of, or

for shares issued before 6 April 2004, 20% of the amount you received for the shares that you disposed.

If the disposal is other than a bargain made at arm's length we will withdraw all the relief you got for the shares you disposed of.

Top

Example

You subscribed £100,000 for 100,000 eligible shares (see 'Tax Reliefs available for investors') in a VCT which were issued to you in the tax year 2000/01. You got income tax relief of £100,000 x 20% = £20,000. In the tax year 2002/03 you sell 40,000 of the shares for £34,000 by way of a bargain at arm's length.

The amount of income tax relief we withdraw is the smaller of:

  • the relief obtained for the shares disposed of (£20,000 x £40,000/100,000 = £8,000)

and

  • 20% of the amount you received on the sale (20% x £34,000 = £6,800).

We will withdraw £6,800 relief.

If you had sold the 40,000 shares for £45,000 by way of a bargain at arm's length, the amount of income tax relief withdrawn would have been the smaller of

  • the relief obtained for the shares you disposed of, £8,000 and
  • 20% of the amount received on the sale 20% x £45,000 = £9,000

So, we would have withdrawn £8,000 relief.

How much of a deferred capital gain will be revived if I dispose of some, but not all my VCT shares?

In such cases, a proportion of the deferred gain will be revived. The amount will depend on the proportion of your investment that attracted deferral relief originally and the extent if any to which the deferred gain has already been revived.

Are there any other circumstances in which a deferred gain may be revived?

The gain can be revived in certain other circumstances, for example

  • if the company's approval as a VCT is withdrawn (see below)
  • if any of the income tax relief on an investment is withdrawn, or
  • if you cease to be resident or ordinarily resident in the UK within three years subject to those shares being held for at least three years after the shares were issued (five years if the shares were issued before 6 April 2000).

The deferred gain will not be revived if you cease to be resident or ordinarily resident in the UK because you work outside the UK and you become resident or ordinarily resident in the UK again within three years without having disposed of any of the shares in the meantime.

What happens to income tax relief or a deferred gain if the investor dies?

If you hold shares for which you have got income tax relief or deferral relief, and you die, we will not withdraw that tax relief, or revive the deferred gain, on account of any event occurring at or after the time of death.

Top

Withdrawal of a company's approval as a VCT

If we withdraw a company's provisional approval (see section 'Conditions for HMRC approval of VCTs')) as a VCT, we will treat its investors as if they had never been entitled to any of the reliefs they got for their shares in the company. This means that

  • we will withdraw all income tax relief
  • we will treat any gain for which you have claimed deferral relief as never having been deferred
  • we will treat any dividends which you received dividend relief on as though they had not been exempt from income tax
  • if you have already disposed of any of the shares, we will treat any gain or loss arising on the disposal as being a chargeable gain or an allowable loss.

If we withdraw a company's full approval (see section 'Conditions for HMRC approval of VCTs') as a VCT within five years of issuing shares (three years for shares issued before 6 April 2006), then

  • we will withdraw any remaining income tax relief you got for any of those shares if we have not done so already, with effect from the date approval is withdrawn
  • we will revive any gain deferred in respect of any of those shares if we have not done so already on the date approval is withdrawn
  • no dividends paid by the company on or after the date approval is withdrawn will be exempt from income tax
  • if you hold any of the shares at the time approval is withdrawn, and are aged 18 or over and did not acquire the shares in excess of the permitted maximum for the tax year, we will treat you as though you sold and immediately reacquired the shares at market value at that time. The 'permitted maximum' is £200,000 for 2004-05 and onwards (£100,000 for previous years).

If we withdraw a company’s full approval as a VCT more than five years ( three years for shares issued before 6 April 2006) after issuing shares, the consequences for the various tax reliefs you got in respect of those shares are the same, except that we will not withdraw any income tax relief on account of the withdrawal of approval.

Top

The companies VCTs invest in

If a company issues any of its shares or securities to a VCT, it must meet certain conditions if those shares or securities are to form part of the VCT's qualifying holdings (see 'Conditions for HMRC approval of VCTs'). These conditions concern both the type of company and the size and mix of investment. There are, for example, requirements as to the company's

  • unquoted status
  • trading activities
  • gross assets
  • independence , and
  • subsidiaries.

Unquoted status

The company must be unquoted for VCT purposes. This means that none of its shares, stocks, debentures or other securities can be listed on a recognised stock exchange.

Companies whose shares etc. are dealt in solely on the Alternative Investment Market (AIM) of the London Stock Exchange or on OFEX are unquoted companies. Shares or securities in a company which ceases to be unquoted can continue to be treated as being comprised in the VCT's qualifying holdings for the following five years.

Top

Trading activities

The company must exist for the purpose of carrying on a 'qualifying trade' or be the parent company of a trading group whose business as a whole meets the scheme's rules. The funds received from the VCT must be used for the purpose of a qualifying trade carried on wholly or mainly in the UK.

Most trades qualify, provided that they are conducted on a commercial basis with a view to making profits. A trade will not qualify if one or more excluded activities together make up a 'substantial part' of that trade. This will depend on the relevant facts and circumstances, but we generally consider that they do where they amount to more than 20% of the trade. The main excluded activities are

  • dealing in land, financial instruments, or in goods other than in an ordinary trade of retail or wholesale distribution
  • financial activities, property development, or providing legal or accountancy services
  • leasing or letting assets on hire, except in the case of certain ship-chartering activities
  • receiving royalties or licence fees, except where these arise from an intangible asset such as a patent or know-how, where most of it has been created by the company (or one of its subsidiaries)
  • farming, market gardening, or forestry
  • operating or managing hotels, guest houses, hostels, or nursing or residential care homes
  • providing services to another company in certain circumstances where the other company's trade consists to a substantial extent in excluded activities.

Gross assets

For investment of funds raised from 6 April 2006, the value of the company’s gross assets must not exceed

  • £7 million (previously £15 million) immediately before the VCT makes its investment, and
  • £8 million (previously £16 million) immediately afterwards.

If the company is a member of a group, the limits apply to the gross assets of the group, taken as a whole. This is known as the 'gross assets' rule and our interpretation of it is given in Statement of Practice SP2/00 (see 'Further Information').

Independence

The company must not be controlled by

  • another company, or
  • another company and a person connected with that company.

Nor must there be any arrangements for such control. For this purpose a company controls another company if it directly or indirectly possesses, or is entitled to acquire

  • more than 50% of the company's share capital or issued share capital, or
  • more than 50% of the voting power in the company, or
  • enough of the company's issued share capital to entitle it to more than 50% of the company's income, if it were all distributed to the company's participators, or
  • more than 50% of the assets of the company that are available for distribution to the company's participators on its winding-up.

For this purpose all loans (except loans convertible into shares) and fixed-rate preference shares that do not carry voting rights are ignored.

Subsidiaries

A company in which a VCT invests may have subsidiaries providing that they meet certain conditions, which are outlined below. The conditions changed with effect for VCT shares issued on or after 17 March 2004.

For shares issued before 17 March 2004 – in the case of each subsidiary, the company or another of its subsidiaries must directly own at least 75% of the issued share capital and possess at least 75% of the voting power. If the money invested in the company by the VCT is to be used by a subsidiary, then that subsidiary must be at least 90% owned by the company invested in. The trading activity for which the money was raised cannot be transferred between companies in the group.

For shares issued on or after 17 March 2004 - in the case of each subsidiary, the company invested in must directly or indirectly own more than 50% of the ordinary share capital of the subsidiary and the subsidiary must not be controlled by any person other than the company invested in or another of its subsidiaries. Additionally, any subsidiary whose business consists wholly or mainly of holding or managing land or property deriving its value from land must be at least 90% owned directly by the company invested in. If the money invested in the company by the VCT is to be used by a subsidiary, then that subsidiary must be at least 90% owned directly by the company invested in. The trading activity for which the money was raised may be transferred between such subsidiaries and the company invested in.

Other requirements

Other rules concerning the investment include rules relating to

  • the maximum size of the investment in any particular company that can count towards the VCT's qualifying holdings
  • how the money invested by the VCT is used and the period within which it must be used, and
  • the need for a minimum proportion of ordinary shares with no preferential rights to dividends or to the company's assets on its winding up, and no right to be redeemed, in the investment made by the VCT in any particular company

How can a company find out if an investment in it by a VCT will be a qualifying holding?

The tax affairs of companies that a VCT has a qualifying holding in are dealt with by our Small Company Enterprise Centre (SCEC) (contact details are in 'Further Information').

A company intending to accept an investment from a VCT can contact the SCEC to seek an assurance that the investment will be a qualifying holding. The company will need to provide all relevant information, including

  • latest available accounts for the company and any subsidiary company
  • a share issue prospectus or business plan if available
  • details of all trading or other activities carried on, or to be carried on, by the company or any subsidiary
  • details of how the money invested in it by the VCT will be used
  • an up-to-date copy of the Memorandum and Articles of Association of the company and of any subsidiary, and details of any changes to be made
  • details of any subscription agreement or other side agreement to be entered into by the VCT.

The Inspector at the SCEC will provide written confirmation if he or she is satisfied, on the basis of the information provided, that the conditions of the VCT scheme which apply to the company and the shares will be met.

If an investment is made in a company without that company getting an advance assurance, then it can still ask the SCEC at a later date to say whether the VCT's holding in it is a qualifying holding.

Further information

Trade associations

You can get information about the venture capital industry and particular VCTs from the website of the British Venture Capital Association (BVCA) or by telephone on 020 7025 2950.

Legislation

  • The provisions for income tax relief on subscription and distributions are in Schedule 15B of the Income and Corporation Taxes Act 1988 (ICTA): schedule 15
  • The provisions for VCTs are in section 842AA ICTA (Finance Act 1995, section 70) and the provisions for companies invested in by a VCT are in Schedule 28B ICTA (Inserted by Finance Act 1995, section 70 & schedule 14)
    • the CGT exemption provisions are at sections 151A and 151B of the Taxation of Chargeable Gains Act 1992 (TCGA) (Inserted by Finance Act 1995, Section 72: Subject to Finance Act 2004, Schedule 19) , and
    • the provisions for deferral of capital gains are at Schedule 5C TCGA (Inserted by Finance Act 1995, Section 72 & Schedule 16: Subject to Finance Act 2004, Schedule 19)


The changes in the Finance Act 2004 and 2006 are briefly outlined in Budget Note BN10 (2004) and Budget Note BN07 (2006).

Statutory Instruments

The Statutory Instruments 2199 relating to the VCTs Winding Up & Mergers, Tax Regulations 2004 issued 31/08/2204 are on our website on: SI2004 -2199

Statements of Practice

Four Statements of Practice currently apply to the VCT scheme, they are

  • SP8/95 'Venture Capital Trusts: Default Terms in Loan Agreements'
  • SP6/98 'Enterprise Investment Scheme, Venture Capital Trusts, Capital Gains Reinvestment Relief and Business Expansion Scheme: Loans to Investors'
  • SP2/00 'Venture Capital Trusts, the Enterprise Investment Scheme, the Corporate Venturing Scheme and Enterprise Management Incentives: Value of gross assets'
  • SP3/00 'Enterprise Investment Scheme, Venture Capital Trusts, Corporate Venturing Scheme, Enterprise Management Incentives and Capital Gains Tax Reinvestment Relief: Location of activity'.

Statements of Practice are contained in our booklet Statements of Practice (PDF 2MB).

HM Revenue & Customs guidance

We have published our VCT guidance in accordance with the Code of Practice on Access to Government Information. It is set out in the Venture Capital Manual contents as follows:

Self Assessment

You can get our Helpsheet IR 298 'Venture Capital Trusts and Capital Gains Tax' by calling our Orderline on 0845 9000 404 or see attached link for the latest version of Helpsheet HS298 (PDF 159K)

Tax Bulletin

Tax Bulletin shows some of our current thinking on technical aspects of taxation. We produce it six times a year, and you can get it by visiting the Tax Bulletin page or on annual subscription. For more information, call the editor on 020 7438 7080.

  • You can find details of how the tax rules allow VCTs to assist with the financing of management buy-outs in certain circumstances in the August 1995 edition of Tax Bulletin.
  • You can find more information on the operation of the rules about companies under the control of VCTs in the October 1997 edition.
  • The April 2002 edition includes an article on in-year claims to EIS and VCT income tax reliefs.

Administration

HM Revenue & Customs Small Company Enterprise Centre (SCEC) deals with enquiries from companies using the Enterprise Investment Scheme, Venture Capital Trust scheme, Corporate Venturing Scheme and Enterprise Management Incentives. You can contact it by

  • calling 029 2032 7400
  • fax on 029 2032 7398
  • e-mail HMRC SCEC
  • or
  • writing to

    HMRC SCEC
    Centre for Revenue Intelligence
    Ty Glas
    Llanishen
    Cardiff
    CF14 5ZG

Top

HM Revenue & Customs (Capital Taxes), is responsible for approving companies as VCTs. For this purpose HMRC (Capital Taxes) will normally want to see copies of the company's

  • draft prospectus
  • business plan
  • Memorandum and Articles of Association
  • accounts or a statement of affairs.

Our notice of approval will specify the date from which approval is given and the date from which approval takes effect.

VCTs are expected to keep to the business plan agreed with HMRC (Capital Taxes), and to make further reports to HMRC (Capital Taxes) on a regular basis.

For enquiries about approval of a VCT and application for such approval, contact HMRC (Capital Taxes) by writing to HMRC (Capital Taxes), 550 Streetsbrook Road, Solihull B91 1QU.