VCM68030 - VCT: deferral relief: which investments qualify?

TCGA92/SCH5C/PARA1 (2)

To qualify for deferral relief the taxpayer must receive ‘front-end' Income Tax relief on the subscription, see VCM64020 onwards. The maximum amount of deferral relief which can be claimed in any one tax year is the total amount subscribed up to £100,000 for shares issued in that one tax year. But a gain of more than £100,000 can be deferred by subscriptions for shares issued in different tax years.

An investor who is unable to obtain the full amount of 'front-end' Income Tax relief available because his or her Income Tax liability is insufficient can still claim deferral relief on the full amount which would qualify for 'front-end' Income Tax relief. For example an investor subscribes £100,000 for 100,000 VCT shares which are issued in the same tax year as the subscription is made. Because his or her Income Tax liability is insufficient the investor's 'front-end' Income Tax relief is restricted to £12,000 but he or she can claim deferral relief up to the full subscription of £100,000 for shares issued in that tax year.

Deferral relief is not available if the investor's Income Tax liability is nil before taking account of ‘front-end' Income Tax relief. In these circumstances no ‘front-end' Income Tax relief is actually given and as a result deferral relief is not available.

VCT deferral relief is abolished for shares issued after 5 April 2004.