Any shares acquired on a rights issue may qualify for disposal
and/or deferral relief. Section 151B (4) disapplies the share
reorganisation rules if a rights issue involves an issue of shares
falling within (a), (b) or (c) of
VCM68900. This means that the investor
is treated as having acquired the new shares at the date of the
rights issue and for the amount they paid for the new shares.
Disposal and/or deferral relief (where the rights issue takes place
on or before 5 April 2004) may be available on the new shares
provided that the investor’s total acquisitions for the tax
year in which the rights issue is made do not exceed the permitted
maximum for that year.
Example
An investor has a holding of 10,000 shares in a VCT. In July
1997 the company declares a 1 for 10 rights issue at a cost of
£2 per share. The investor takes up his or her full rights.
There are no other transactions involving VCT shares. The new
shares qualify for disposal and deferral relief. The investor is
treated as having acquired these shares in July 1997 at a total
cost of £2,000.
VCT deferral relief is abolished for shares issued after 5
April 2004.
