Chapter 2: VCT relief
Overview
801.This Chapter:
identifies who is eligible for VCT relief and on what amounts;
identifies the claims to VCT relief that may be made;
quantifies the entitlement to the tax reduction;
deals with cases in which VCT relief is not available or will be reduced or withdrawn; and
deals with other matters (information and powers to make regulations).
Section 261: Eligibility for relief
802.This section identifies cases in which, and amounts in respect of which, an individual is eligible for VCT relief for a tax year. It is based on paragraph 1(1), (2), (4), (9) and (10) of Schedule 15B to ICTA.
Section 262: Entitlement to claim relief
803.This section provides for an individual to claim VCT relief for a tax year. It is based on paragraph 1(1) and (3) of Schedule 15B to ICTA.
804.Subsection (2) explicitly provides that a claim by the individual does not have to extend to all the shares by reference to which such eligibility exists for the tax year. This is implied by paragraph 1(3) of Schedule 15B to ICTA which simply sets a limit on a claim for relief.
Section 263: Form and amount of relief
805.This section specifies that a claim for VCT relief gives entitlement to a tax reduction and quantifies the amount of that entitlement. It is based on paragraph 1(5) of Schedule 15B to ICTA.
806.Subsection (1) is expressed in terms of the individual’s entitlement to a tax reduction. Sections 27 and 29 contain provisions about how effect is given to the entitlement to a reduction and how the actual reduction is quantified.
Section 264: No entitlement to relief if there is a linked loan
807.This section removes an individual’s entitlement to VCT relief by reference to shares if certain loans are made, as described in this section, to the individual or an associate of the individual. It is based on paragraph 2 of Schedule 15B to ICTA.
Section 265: No entitlement to relief which would have been lost if it had already been obtained
808.This section removes entitlement to VCT relief by reference to shares if, before the relief is obtained, circumstances have arisen that would cause the relief to be withdrawn or reduced. It is based on paragraph 1(8) of Schedule 15B to ICTA.
809.This and other sections follow the terminology used by other venture capital schemes and refer to relief being “obtained” where paragraph 1(8) refers, and other paragraphs in Schedule 15B to ICTA refer, to relief being “given”.
Section 266: Loss of relief if shares disposed of within 5 years
810.This section reduces or withdraws any VCT relief obtained by reference to shares that are disposed of within five years of their issue. It is based on paragraph 3(1) to (4) and (8) of Schedule 15B to ICTA.
Section 267: Transfers of shares between spouses or civil partners
811.This section prevents loss of VCT relief occurring where the shares in question are disposed of between spouses or civil partners who are living together at the time of disposal. It also provides for step-in-shoes treatment, for VCT relief purposes, in respect of shares transferred between those spouses or civil partners. It is based on paragraph 3(5) to (7) of Schedule 15B to ICTA.
Section 268: Loss of relief if VCT approval withdrawn
812.This section treats certain shares in a company as disposed of, for VCT relief purposes, at the time VCT approval is withdrawn from a company. It is based on paragraph 3(9) of Schedule 15B to ICTA.
813.Subsection (1) does not apply where section 281(3) treats VCT approval as never having been given to a company. In those cases there never was any entitlement to VCT relief in respect of the company’s shares and any relief that was obtained is withdrawn under section 269.
814.Subsection (2) has provisions about the timing (immediately before loss of VCT approval) and nature (not arm’s length) of any disposal of shares that is treated as taking place. These provisions ensure that any VCT relief recapture (where the shares were issued less than five years before loss of approval) covers all the VCT relief obtained in respect of the shares concerned.
Section 269: Loss of relief which is subsequently found not to have been due
815.This section withdraws any VCT relief that has been obtained but which should not have been obtained. It is based on paragraph 4(1) of Schedule 15B to ICTA.
Section 270: Assessment on withdrawal or reduction of relief
816.This section provides that withdrawal or reduction of VCT relief, under the preceding sections, is by way of assessment for the tax year for which the relief was obtained. It is based on paragraph 4 of Schedule 15B to ICTA.
Section 271: Provision of information
817.This section, in connection with VCT relief, provides for cases where information must be given to an officer of Revenue and Customs and cases where the officer may require information. It is based on paragraphs 1(11) and 5 of Schedule 15B to ICTA.
818.Subsection (4) requires a VCT to give notice to an individual if section 261(4) (issue of own shares) prevents the individual from being eligible for relief. Section 261(4) contains a signpost to this requirement.
Section 272: Regulations as to procedure etc
819.This section allows the Treasury to make regulations about certain aspects of VCT relief and other reliefs related to VCTs. It is based on section 73(1) and (2) of FA 1995.
820.This power has been used in relation to the Venture Capital Trust Regulations 1995 (SI 1995/1979).
Section 273: Interpretation of Chapter
821.This section provides definitions of certain terms used in the Chapter. It is based on paragraph 6(1) and (3) of Schedule 15B to ICTA.
822.The section removes a possible doubt as to the effectiveness of the amendment made by section 73(1)(b) of FA 1998 to the definition of “eligible shares” in paragraph 6(1) of Schedule 15B to ICTA. See Change 58 in Annex 1. Part 8 of Schedule 2 to this Act contains a provision to preserve this possible doubt as to the meaning of eligible shares for shares issued before 6 April 2007.
