VCTs

Question 1

In which 2 ways are VCTs similar to investment trusts?

Answer 1

Both listed companies
Run by fund managers

Question 2

What is the MAIN difference between a VCT and an EIS with regards to spreading risk?

Answer 2

VCT - investment in a range of companies
EIS - investment in only one company

Question 3

VCT max. investment?

Answer 3

£200,000

Question 4

What is the income tax relief on a VCT and how long do the shares need to be kept before losing the income tax relief?

Answer 4

30%
5 years

Question 5

When do dividends become taxable on a VCT investment?

Answer 5

Shares over £200,000

Question 6

What is the CGT treatment on a gain arising from the disposal of shares in a VCT?

Answer 6

Exempt

Question 7

Losses on VCT cannot be offset for CGT purposes. True or false?

Answer 7

True

Question 8

How quickly should money be used that’s raised within a VCT?

Answer 8

2 years

Question 9

Should VCTs be listed or unlisted to qualify?

Answer 9

Listed (specifically LSE)

Question 10

How much of the total investment in a VCT can be invested in any single company or group?

Answer 10

15% max

Question 11

At least how much of the total investment in any one company must be in ordinary, non-preference shares.

Answer 11

10%

Question 12

A company raising money under a VCT must have how many employees on the date the shares are issued, as a maximum according to HMRC for approval purposes?

Answer 12

250 or 500 if a knowledge-intensive company

Question 13

To be a qualifying holding of a VCT, a company must have raised no more than how much, under all VCT schemes in the
twelve months ending on the date of the investment?

Answer 13

£5m (£10m for knowledge-intensive companies)

Question 14

For HMRC approval, what’s the maximum that can be raised during the company’s lifetime after the date of investment?

Answer 14

£12m (or £20m for knowledge-intensive companies)

Question 15

Companies benefiting substantially from subsidies for the generation of which industry are excluded from the benefits of VCTs?

Answer 15

Renewable energy

Question 16

Investments in VCTs that are conditionally linked in any way to a share buyback, or that have been made within six months of a disposal of shares in the same VCT, are still included to qualify for new tax relief. True of false?

Answer 16

False, they are excluded

Question 17

Who is tax-relief on VCTs available to and who is excluded?

Answer 17

Available to private investors over 18
Excluded are trustees and companies

Question 18

For individuals who do not subscribe but acquire by other means (eg purchase from someone else), which tax relief is not claimable?

Answer 18

Income tax at 30%

Question 19

For HMRC approval, a VCT must not retain more than how much of the income it derives from shares or securities?

Answer 19

15%

Question 20

Investors can subscribe for VCT shares through nominees. True or false?

Answer 20

True

Question 21

How soon must the VCT make its first investment?

Answer 21

7 years of the company’s first commercial sale
10 years knowledge intensive

Question 22

Why might it be difficult for an investor to sell their VCT shares?

Answer 22

Tax relief not available if bough second hand
They aren’t very liquid

Question 23

What is the CGT treatment on gains from VCT shares?

Answer 23

CGT exempt

Question 24

At least how much of a VCT investment funds must be in qualifying holdings?

Answer 24

80%

Question 25

A VCT is exempt from corporation tax on gains arising on the disposal of its investments, and these realised gains can be distributed to investors as dividends with no additional tax
liability for the investor. True or false?

Answer 25

True

Question 26

How is income paid through a VCT?

Answer 26

Tax-free dividends

Question 27

Is there IHT relief on a VCT?

Answer 27

No