VCM56030 - VCT: VCT winding-up: 바카라 사이트˜front-end바카라 사이트™ income tax relief
SI2004/2199 Regulation 4; ITA/S266 & S268
Background
ITA07/S266 requires that where an investor has received 바카라 사이트˜front-end바카라 사이트™ income tax relief (VCM51020 onwards) in respect of an investment of eligible shares in a VCT the relief is withdrawn or reduced where those shares are disposed of within five years (three years for shares issued between 6 April 2000 and 5 April 2006) of the date of issue - the 바카라 사이트˜minimum holding period바카라 사이트™. Also, where VCT approval is withdrawn investors are deemed to have disposed of their shares in the company immediately before the time of the withdrawal of approval (VCM51090).
So, without SI2004/2199 loss of approval resulting from the winding up of a VCT would trigger the withdrawal of 바카라 사이트˜front-end바카라 사이트™ income tax relief from any investors who had not completed the minimum holding period.
To gain the benefits available under SI2004/2199 a VCT-in-liquidation must (unless its winding up is ordered by the court) have had VCT approval for the three years preceding the start of its winding up (five years in the case of companies that, post-approval, first issued shares between 6 April 2004 and 5 April 2006 (see VCM56010). It is possible that a VCT may go into winding up while its investors are still within the minimum holding period for their shares.
Effect of Regulation 4: protection of investors바카라 사이트™ 바카라 사이트˜front end바카라 사이트™ income tax relief
Regulation 4 of SI2004/2199 ensures that for the purposes of ITA07/S268 the commencement of winding up proceedings does not affect the VCT approval status of the VCT-in-liquidation. This means that, of itself, commencement of winding up of a VCT will not result in the loss or reduction of investors바카라 사이트™ 바카라 사이트˜front-end바카라 사이트™ income tax relief.
Withdrawal of approval unconnected with commencement of winding up
Regulation 4 of SI2004/2199 protects investors바카라 사이트™ 바카라 사이트˜front end바카라 사이트™ relief only to the extent that the commencement of winding up might otherwise have triggered a deemed disposal under ITA/S268). If approval is withdrawn from a VCT-in-liquidation for reasons other than the commencement of the winding up the consequences for the investor are the same as those which would have followed had approval been withdrawn from a VCT that was not being wound up.
So where:
- VCT approval is withdrawn from a VCT-in-liquidation for reasons not connected with the commencement of winding up, and
- that withdrawal takes effect within five years of an issue of eligible shares (three years for issues between 6 April 2000 and 5 April 2006),
the withdrawal of VCT approval will be treated as a disposal (ITA07/S268)) of shares in a VCT-in-liquidation by any investors who have benefited from 바카라 사이트˜front-end바카라 사이트™ income tax relief. Any 바카라 사이트˜front-end바카라 사이트™ income tax relief previously given to those investors in respect of the shares in question will be withdrawn.
Approval not withdrawn: disposals of shares and capital distributions
Where a VCT-in-liquidation does not have its VCT approval withdrawn ITA07/S266 may still apply to withdraw or reduce investors바카라 사이트™ 바카라 사이트˜front-end바카라 사이트™ income tax relief if investors dispose of the company바카라 사이트™s shares within the five-year (or three-year) minimum holding period. In this connection note that any capital distribution during the course of a winding up is treated as a disposal of an interest in those shares and hence as a disposal of the shares for the purposes of ITA07/S266 (see TCGA92/S122 & ITA07/S273(2)).