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Tax - Direct Tax > PLC - Venture Capital Trusts > Flashcards

PLC - Venture Capital Trusts Flashcards

0
Q

Can VCTs invest in companies listed on AIM?

A

Yes

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1
Q

What is a venture capital trust?

A

A listed company that invests in unquoted trading companies.

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2
Q

Can a VCT be listed on a ‘European Union Regulated Market’ ?

A

Yes.

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3
Q

In what circumstances will income tax relief for VCT investments be restricted or reduced?

A

If the investor sells the shares in the VCT and either (i) the subscription and sale are within 6 months of each other, or (ii) the subscription was conditional on a buyback of the shares or the buyback was conditional on the subscription.

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4
Q

What income tax relief is available to individual investors subscribing for shares in VCTs?

A

Income tax relief at a rate of 30% on an investment of up to £200,000 a tax year, provided the investor’s VCT shares are held for at least 5 years and in respect of an issue of VCT shares only.

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5
Q

What CGT relief is available on relation to VCTs?

A

Investors in VCTs are exempt from CGT on the disposal of the VCT shares, in respect of both new issues of shares and the acquisition if existing shares.

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6
Q

What additional income tax relief is available to individuals who have invested in VCTs?

A

Investors are exempt from income tax on dividends received from the VCT in respect of shares acquired within the permitted annual maximum for income tax relief. This applies to both new issues of shares and the acquisition of existing shares.

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7
Q

What CGT relief is no longer available in respect of VCTs?

A

CGT deferral relief. This is no longer available for investments in shares issued after 5 April 2004.

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8
Q

How is a VCT itself taxed?

A

A UK tax resident VCT will not pay tax on dividends from its UK resident investee companies or from non-UK resident investee companies provided the distribution falls within an ‘exempt class’. The VCT will be taxed on all interest received. It is also exempt from tax on chargeable gains on the disposal of its investments.

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9
Q

Can a VCT be listed on AIM and still be approved by HMRC?

A

No.

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10
Q

Can a VCT be a close company?

A

No

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11
Q

What must a VCT’s income be derived wholly or mainly from?

A

Shares or securities

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12
Q

What is the limit on the value of a VCT’s total investments in any one single company?

A

15 per cent of the VCT’s total investments

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13
Q

What must at least 70 per cent of a VCT’s investments be in?

A

“Qualifying investee companies”

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14
Q

Does HMRC approval of VCT status have to be applied for?

A

Yes

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15
Q

With effect from 17 July 2012, what is the limit on a VCT’s investment in a company in the 12 months ending on the day the VCT invests?

A

An annual investment limit, which from 6 April 2012 is £5m

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16
Q

Does HMRC consider that it has discretion as to whether or not it can withdraw approval following a breach of the approval conditions for a VCT?

A

No

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17
Q

For shares issued on or after 6 April 2012, what must an investee company (or its group) have no more than in terms of gross assets before the investment is made by the VCT?

A

£15m of gross assets

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18
Q

For shares issued on or after 6 April 2012, what must an investee company (or its group) have no more than in terms of gross assets after the investment is made by the VCT?

A

£16m of gross assets

19
Q

When will a £1m investment limit apply to shares issued on or after 6 April 2012 to a VCT?

A

If the investee company (or one of its qualifying subsidiaries) is a member of a partnership or joint venture, the qualifying trade was carried on by the partnership or joint venture, and the partnership or joint venture includes at least one other company. The limit is divided then by the number of partners in the partnership or participants in the joint venture.

20
Q

What is the limit on funds that can be raised from VCTs, EIS and SEIS by a company (or group if the investee company is the parent of a trading group)?

A

As of 6 April 2012, £5m in total in any 12 month period ending with the issue of the relevant holding (see s292A ITA 2007).

21
Q

If a company breaches the £5m annual VCT investment limit by receiving more than this amount, is VCT relief denied for the excess or the entire investment?

A

The whole of the investment.

22
Q

Can a VCT investee company be quoted?

A

No, although its shares may be traded on AIM.

23
Q

Must a VCT investee company carry on a qualifying trade or be the parent company of a trading group whose business as a whole meets the trading requirement?

A

Yes.

24
Q

What is a qualifying trade for the purposes of the VCT rules on qualifying investee companies/ groups?

A

Most trades are qualifying trades provided (1) they are conducted on a commercial basis and (2) with a view to the making of profits and (3) do not include a substantial amount of excluded activities.

25
Q

Is dealing in land, shares or commodities a qualifying activity for the purposes of the VCT rules on qualifying investee companies/ groups?

A

Yes.

26
Q

Are financial activities a qualifying activity for the purposes of the VCT rules on qualifying investee companies/ groups?

A

Yes.

27
Q

Is property development a qualifying activity for the purposes of the VCT rules on qualifying investee companies/ groups?

A

Yes.

28
Q

Is farming a qualifying activity for the purposes of the VCT rules on qualifying investee companies/ groups?

A

Yes.

29
Q

Is the operation or management of hotels or nursing homes a qualifying activity for the purposes of the VCT rules on qualifying investee companies/ groups?

A

Yes.

30
Q

Will an investee company meet the qualifying trade requirement for VCT purposes if it is preparing to carry on a trade or carrying on R&D from which a qualifying trade will derive or benefit?

A

Yes.

31
Q

What is a ‘substantial part’ of a trade for the purposes of the VCT rules on excluded activities?

A

More than 20 per cent of a trade, by reference to a number of possible factors (time spent, turnover, asset base, income/ capital employed).

32
Q

What factors did the FTT look to in Steven Price and others v HMRC [2013] in determining whether an activity is substantial?

A

(1) The actual time and effort spent by the director performing these tasks in the context of the business activities of the trading company and (2) the fact that profits from the arrangements could be said to be made for the purposes of that trade.

33
Q

Must monies received from a VCT be used for the purposes of a qualifying trade?

A

Yes.

34
Q

Is there a territorial aspect for VCT relief such that the qualifying trade must be carried on wholly or mainly in the UK?

A

Only for periods before 6 April 2011

35
Q

If money raised from a VCT is used for the purposes of a trade of a subsidiary company, what group structure requirements are attached to VCT relief?

A

The subsidiary company must be a 90 per cent subsidiary of the issuing company (directly or indirectly).

36
Q

Must the money raised by an investee company from a VCT be employed wholly for the purposes of its trade or that of its subsidiary?

A

Yes.

37
Q

For investments made out of funds raised by VCTs on or after 22 April 2009, when must the money raised be used by?

A

Within two years of being raised.

38
Q

Do the eligible investee company rules contain voting, control and economic ownership tests where funds raised from a VCT are to be used by a 90 per cent subsidiary?

A

Yes.

39
Q

What is the maximum number of employees that can work at a VCT investee company or group?

A

250 full time employees for shares issued on or after 6 April 2012.

40
Q

For shares issued on or after 6 April 2011, are ‘enterprises in difficulty’ eligible for investment under the VCT scheme?

A

No.

41
Q

What is the VCT disqualifying arrangements test?

A

A test intended to ensure that companies established solely for the purpose of accessing VCT reliefs are excluded from the scheme.

42
Q

What must VCTs issue to individual investors?

A

Certificates that state eligible shares have been issued to the investor for genuine commercial reasons and not linked to loans.

43
Q

Can shares in VCTs be issued to nominees?

A

Since 17 July 2014, investment in VCTs can be made through nominees (section 330A, Income Tax Act 2007 (ITA 2007)). Regulations require the VCT, the beneficial owner and the nominee to provide information to, and make records available for inspection by, HMRC

44
Q

What is the position as regards VCTs and replacement capital?

A

As of 2016, and subject to obtaining state aid approval, the government will introduce increased flexibility for replacement capital for the VCT scheme. Replacement capital is the purchase of shares from existing shareholders and is not currently permitted.

45
Q

What type of commercial activities are to be excluded from VCTs in 2016?

A

All energy generation activities are excluded activities with effect from 6 April 2016.

46
Q

Is there a total investment limit for VCTs?

A

Yes. For relevant holdings issued on or after 18 November 2015, the investee company must not raise more than £12 million (£20 million if a knowledge-intensive company) in total from relevant investments

Tax - Direct Tax (10 decks)

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