VCT TAX RELIEFS – Frequently Asked Questions
We are frequently asked about the tax relief available to investors who subscribe for VCT shares, as well as about the conditions attached, so we thought it might be helpful if we answered some of the most frequent questions:
Q: How much tax relief am I entitled to on my subscription for VCT shares?
A: Under the current rules, you are entitled to a reduction in your income tax bill equal to 30% of the amount subscribed. Different reliefs applied to VCT share subscriptions made prior to 6 April 2006.
Q: Are there any limits on the amount of tax relief I can obtain?
A: Tax relief is only available on subscriptions for VCT shares of up to £200,000 per person in any tax year. The relief is limited to the amount which reduces your income tax bill to zero.
Q: What restrictions are there on selling VCT shares?
A: If you sell VCT shares which you subscribed for less than 5 years ago, you will have to repay any tax relief received, except for shares subscribed for in the tax years 2004/5 and 2005/6, which can be sold after 3 years without any loss of relief.
Q: How do I obtain the tax relief?
A: You will need to notify your tax office of the amount you have subscribed for VCT shares, either by completing the appropriate section on your self-assessment form or by writing to them and enclosing the tax certificate issued with your shares.
Q: Do I have to pay tax on any income or capital gains generated from my investment in VCT shares?
A: No income tax is payable on dividends paid by VCTs, for shares acquired within the annual £200,000 limit. Similarly, no capital gains tax (CGT) is payable on any profits made on the disposal of VCT shares – however, any losses on disposal of VCT shares cannot be offset against capital gains on other assets for CGT purposes.
Q: Are the rules the same if I buy shares in the secondary market?
A: If you buy shares in the secondary market, you will not be entitled to income tax relief on the amount paid. However, you will not have to pay income tax on any dividends received from these shares, providing that the purchases are within the annual £200,000 limit.
Please note: This does not constitute personal tax advice. Please contact your financial, or tax, adviser if you have any questions about your personal tax circumstances. Beringea is not authorised to give personal tax advice.