The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
A venture capital trust (VCT) is a quoted company that invests in shares and securities issued by qualifying unquoted trading companies with a permanent establishment in the UK.
A subscription in eligible shares of a qualifying VCT is a tax efficient investment for the individual. The individual can benefit from the following tax reliefs:
income tax relief of up to 30% on the amount invested
income tax exemption for dividends from the VCT
capital gains tax exemption on any gain on the sale of the VCT shares
These reliefs are considered in further detail in the Venture capital trusts income tax relief guidance note. The conditions for a valid investment are discussed below.
VCTs are attractive to investors who want to spread their risk by indirectly investing in a number of unquoted companies rather than investing direct in one company, as in the enterprise investment scheme. For more on that scheme, see the Enterprise investment scheme ― introduction guidance note.
Note that a sunset clause for VCT income tax relief has been introduced. This ensures that income tax relief will no longer be given to subscriptions made on or after 6 April 2025, unless the legislation is renewed by Treasury Order.
As tax relief is only available for subscriptions by an individual in ‘eligible’ shares in a ‘qualifying’ VCT, it is important to be clear on the conditions that must be met.
To obtain the income tax relief on investment in a VCT, the investor must meet all the following conditions:
be over 18 years old when the shares are issued
subscribing for shares on their own behalf (although from 17 July 2014, the shares can be held on behalf of the investor by a nominee), and
the investment must be for genuine commercial reasons and not to avoid tax
ITA 2007, ss 261(1), (3), 330A
In relation to shares issued on or after 6 April 2014, income tax relief is restricted where the subscription
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