The Venture Capital Trust Regulations 1995

Explanatory Note

(This note is not part of the Regulations)

Sections 70 to 73 of, and Schedules 14 to 16 to, the Finance Act 1995 (“the 1995 Act”), make provision in relation to venture capital trusts. These Regulations, made by the Commissioners of Inland Revenue (“the Board”) under section 73 of the 1995 Act, make further provision in relation to such trusts.

The Regulations are in four parts of which Part I is introductory. Regulation 1 provides for citation and commencement, and regulation 2 for interpretation.

Part II of the Regulations is concerned with approval of a company as a venture capital trust for the purposes of section 842AA of the Income and Corporation Taxes Act 1988 (“section 842AA” and “the 1988 Act” respectively). (Section 842AA was inserted by section 70(1) of the 1995 Act.) Regulation 3 makes provision for applications for approval. Regulation 4 makes provision for the Board’s approval of a company (which may be either provisional approval or full approval) for the purposes of section 842AA, regulation 5 for the Board’s refusal of approval, and regulation 6 for the Board’s withdrawal of approval. Regulation 7 provides for a company to appeal to the Special Commissioners against decisions of the Board, and regulation 8 makes provision for the position where the conditions for approval are no longer satisfied.

Part III of the Regulations, which has two Chapters, makes provision for the reliefs from income tax in respect of investments in venture capital trusts and distributions by such trusts.

Chapter I of Part III is concerned with the relief from income tax in respect of investments in venture capital trusts; and regulation 9 provides for a certificate to be given to an investor if that investor so requires.

Chapter II of Part III is concerned with the relief from income tax in respect of the distributions by venture capital trusts.

Regulation 10 provides that relief from income tax shall not be given except where the venture capital trust has complied with the requirements imposed by regulations 11 and 14 and has made a claim in accordance with the Chapter. This regulation also provides that a tax credit to which an investor is entitled shall be paid to the venture capital trust, and that an amount equal to that tax credit shall be paid to the investor.

Regulation 11 imposes a requirement that relief from income tax shall not be given except where the venture capital trust has obtained an enduring declaration. Regulation 12 makes provision relating to the enduring declaration and regulation 13 for a venture capital trust to deliver a return containing particulars of enduring declarations to the Board.

Regulation 14 imposes a requirement that relief from income tax shall not be given except where the venture capital trust has no reason to believe that the enduring declaration is incorrect. Regulation 15 makes provision for the position arising where a venture capital trust has reason to believe that the declaration is incorrect: the venture capital trust is to deliver a statement to the Board, and may, in certain circumstances, be assessed to tax under section 252 of the 1988 Act.

Regulations 16 to 19 make provision for claims. Regulation 16 is introductory, regulations 17 and 18 make provision for interim and annual claims respectively, and regulation 19 contains supplementary provisions.

Regulations 20 and 21 contain additional provisions. Regulation 20 makes provision for the situation arising where provisional approval is withdrawn, and regulation 21 provides for tax credit vouchers to be issued in certain circumstances.

Part IV of the Regulations contains further administrative provisions. Regulation 22 makes provision for a return containing particulars of investments to be delivered to the Board; and regulations 23 to 25 for records to be kept, and for the Board to be provided with information and to inspect records.