VCM56010 - VCT: VCT winding-up: introduction
FA02/S109 & FA02/SCH33; SI2004/2199; ITA/S274
Background and legislation
ITA07/S274 sets out a number of conditions that a company must meet, and continue to meet, if it is to achieve and maintain approval as a VCT (VCM54020). Events that occur during the course of its winding up could result in a failure of such a company to meet some of those conditions. For example, at various stages of the winding up, some or all of the shares making up the company바카라 사이트™s ordinary share capital might cease to be listed in the Official List of the Stock Exchange, or the company might lose beneficial ownership of its assets. Without further provision, a loss of approval triggered by such events would result in loss of tax reliefs for investors (and the VCT).
This situation was addressed by FA02/SCH33, which enables Regulations to be made by the Treasury to provide tax rules applicable to cases where a VCT is being wound up. Regulations made under that power were introduced as part of The Venture Capital Trust (Winding up and Mergers) (Tax) Regulations 2004 (SI2004/2199).
VCT-in-liquidation
FA02/SCH33 & SI2004/2199 introduce the concept of a 바카라 사이트˜VCT-in-liquidation바카라 사이트™. This is defined (ITA07/S320) as a company that:
- is being wound up (whether under UK law or the law of some other territory),
- was an approved VCT immediately before the commencement of its winding up, and
- whose winding up is for bona fide commercial reasons (and is not part of some scheme to avoid tax).
When the winding up regulations apply
The regulations in SI2004/2199 apply where:
- a VCT-in-liquidation is being wound up under proceedings that commenced on or after 17 April 2002,
- the company has given notice to HMRC that a resolution has been passed, or petition granted, to wind up the company (SI1995/1979 Regulation 8(1)) (VCM54410), and
either
- the company must have had VCT approval for a continuous period of 3 years, in some cases 5 years, immediately preceding the start of its winding up,
or
- the company is being wound up by order of the court.
The 5-year period applies only where the company, having been approved as a VCT, first issued shares in the period 6 April 2004 to 5 April 2006 (the period during which 바카라 사이트˜front end바카라 사이트™ income tax (VCM51020) was available at a rate of 40%).
- Shares first issued before 6 April 2004 or after 5 April 2006: three-year approval requirement.
Where a company, having been approved as a VCT, first issues ordinary shares before 6 April 2004 or after the 5 April 2006 the continuous period throughout which the company must have held VCT approval status is 3 years.
- Shares first issued between 6 April 2004 and 5 April 2006: five-year approval requirement.
Where a company, having been approved as a VCT, first issues ordinary shares between 6 April 2004 and 5 April 2006 the continuous approval period is 5 years.
When the regulations do not apply
The regulations do not apply to any VCT-in-liquidation that is or has been a 바카라 사이트˜merging company바카라 사이트™ (other than a 바카라 사이트˜successor company바카라 사이트™) as defined in ITA07/S323 (VCM57020).
Effect of the regulations
For windings up to which SI2004/2199 applies the rules that normally relate to VCTs are modified. But this modification is limited to a prescribed winding up period of three years (or less if the winding-up is completed or ceases earlier without being completed) (VCM56020).
For the duration of this prescribed winding-up period SI2004/2199 operates as follows:
| VCM56030 | Investors바카라 사이트™ 바카라 사이트˜front-end바카라 사이트™ income tax relief: of itself, commencement of winding up of a VCT will not result in the loss of investors바카라 사이트™ 바카라 사이트˜front-end바카라 사이트™ income tax relief. |
|---|---|
| VCM56040 | Investors바카라 사이트™ CGT exemption: investors바카라 사이트™ capital gains tax exemption on disposals of VCT shares is preserved despite the commencement of its winding up. |
| VCM56050 | Investors바카라 사이트™ deferred gains: the winding up of a VCT does not of itself cause investors바카라 사이트™ deferred capital gains to be brought back into charge. |
| VCM56060 | Disposals by VCT: disposals by the VCT during the course of its winding up do not give rise to chargeable gains or allowable losses. |
| VCM56070 | Investments transferred between VCTs: hard-to-sell investments may be transferred from a VCT that is being wound up to another VCT without loss of their status as 바카라 사이트˜qualifying holdings바카라 사이트™. |
Attribution of liquidator바카라 사이트™s acts
For the purposes of the winding up regulations, and this guidance, things done by a VCT-in-liquidation include things done by a liquidator of that company (Regulation 2(4) of SI2004/2199).