VCM69050 - VCT: winding-up: deferral relief
SI2004/2199 Regulation 7; TCGA92/SCH5C/PARA3
Background
TCGA92/SCH5C allows individuals to claim a deferral of capital gains where they are issued with eligible shares (before 6 April 2004) in a VCT ( VCM68010) in respect of which they obtain ‘front end’ income tax relief. Loss of approval of that company as a VCT would, in the absence of any specific provision, cause any such deferred gains to be brought back into charge ( VCM68160).
Deferral relief during the prescribed winding-up period
Regulation 7 of SI2004/2199 ensures that the winding-up of a VCT does not of itself trigger an immediate revival (or crystallisation) of deferred gains. It achieves this by providing that for the purposes of determining whether a chargeable event occurs during the prescribed winding-up period ( VCM69020) of a VCT-in-liquidation ( VCM69010):
- it will continue to be treated as a VCT (if it is not a VCT), and
- any withdrawal of approval during that period is disregarded.
So any deferred gains will continue to be deferred until some
other chargeable event occurs, despite the winding-up of the VCT
against whose shares the deferral relief was claimed, and the
possible withdrawal of approval from the VCT-in-liquidation.
In this context any capital distribution made in respect of
shares during the course of the winding-up of a VCT-in-liquidation
is treated as a disposal of an interest in those shares (
CG57800 onwards) and would
cause any chargeable gain that had been deferred in respect of the
investment in those shares to be brought back into charge
(TCGA92/SCH5/PARA3 (1)(a)).
Deferral relief at the end of the prescribed winding-up period
If a VCT-in-liquidation is still in existence immediately following the end of its prescribed winding-up period any remaining deferred gains that relate to those shares are brought back into charge at that time.
