VCTs—circumstances in which relief is withdrawn or reduced
VCTs—circumstances in which relief is withdrawn or reduced

The following Tax practice note provides comprehensive and up to date legal information covering:

  • VCTs—circumstances in which relief is withdrawn or reduced
  • VCT shares disposed within five years
  • Calculating the clawback of investment income tax relief—disposal of VCT shares
  • Share matching rules
  • Loss of relief subsequently found not to have been due
  • Meaning of associate
  • Relief withdrawn because VCT ceases to be HMRC approved
  • Effective date of withdrawal of VCT approval
  • Withdrawal of VCT approval—impact on investment income tax relief
  • Withdrawal of VCT approval—impact on dividend tax relief
  • More...

Like the enterprise investment scheme (EIS), the venture capital trust (VCT) regime is designed to encourage investment in smaller, higher-risk trading companies. A VCT is a company (not a trust), approved by HMRC, whose shares are admitted to trading in such a way that they meet the listing condition explained in Practice Note: VCTs—VCT conditions for HMRC approval—The listing condition. Individuals can benefit from a range of tax reliefs, and spread their investment risk, by subscribing for (or buying) shares in a VCT, which, in turn, subscribes for newly issued shares or debt in unquoted companies (companies listed on AIM or PLUS markets (other than the PLUS-listed market) are unquoted for these purposes).

For full details of these reliefs (and the conditions that must be met by the individual investor and their investment in VCT shares), see Practice Note: VCTs—introduction to regime and description of tax reliefs. In summary, the principal tax reliefs are:

  1. investment income tax relief at 30% of the amount subscribed for new ordinary shares in a VCT, up to the annual investment limit in VCTs of £200,000 (VCT Annual Limit), and subject to clawback if the shares are disposed of within five years

  2. dividend tax relief providing an exemption from income tax on dividends received in respect of new or existing ordinary shares subscribed for or acquired second hand in a

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