PT36 Venture Capital Trusts

Question 1

What’s a qualifying VCT company?

Answer 1

• A quoted company.
• Income must be derived wholly/mainly from shares.
• Must invest at least 80% in shares in qualifying companies.
• At least 70% of qualifying holdings must be in form of eligible shares.
• Cannot invest more than 15% of its funds in any one company.
• Must distribute at least 85% of its income.
• If the VCT issues further shares, it must invest at least 30% of the funds in qualifying holdings within 12 months of the end of the accounting period in which the shares are issued.
• A qualifying company for the purposes of the VCT’s investments is one that meets the conditions for EIS

Question 2

A qualifying VCT company must invest at least ____% in shares in qualifying companies

Answer 2

80%

Question 3

At least ___% of qualifying holdings must be in eligible shares

Answer 3

70%

Question 4

A qualifying VCT company cannot invest more than ___% of its funds into any one company

Answer 4

15%

Question 5

If the VCT issues further shares, it must invest at least ___% of the funds in qualifying holdings within 12 months of the end of the accounting period in which the shares are issued.

Answer 5

30%

Question 6

A qualifying company for the purposes of the VCT’s investments is one that meets the conditions for ____

Answer 6

EIS

Question 7

How is tax relief given when you subscribe for VCT shares?

Answer 7

Income tax reducer at 30% of amount subscribed (maximum of £200,000 x 30%)

Can only reduce income tax to nil

Dividends on first £200,000 acquired are tax free (different from EIS)

Question 8

What are the income tax consequences of selling VCT shares?

Answer 8

• If sold within five years
• Clawback is the lower of:
  – Original income tax reducer
  – 30% × sale proceeds received (only applicable if sold for a loss)
• Clawback also if VCT loses its approved status within five years
• Income tax reducer clawed back via assessment for the year in which relief originally given.
• No withdrawal of income tax reducer if sold after five years

Question 9

If you sell your VCT shares early, how much is clawed back?

Answer 9

• Clawback is the lower of:
  – Original income tax reducer
  – 30% × sale proceeds received (only applicable if sold for a loss)

Question 10

How long do you have to hold your VCT shares to avoid clawback?

Answer 10

5 years

Question 11

If you sell your VCT shares early, when is the clawback?

Answer 11

• Income tax reducer clawed back via assessment for the year in which relief originally given.