You are here: Home - Investing -

HMRC error leaves VCTs unable to issue shares

Written by:
Venture Capital Trusts have been hoarding investor cash after an error from HM Revenue and Customs left the vehicles afraid of issuing new shares.

New legislation introduced by the Treasury was intended to prevent VCTs from abusing their tax-efficient status by paying out dividends to investors buying in to a VCT for a very short period of time purely to collect the tax-free dividend.

However, wording in this year’s Finance Bill mistakenly implies trusts paying dividends to any shareholders purchasing new shares after 6 April would lose their tax-efficient status.

Some VCTs are understood to have held off issuing new shares after 6 April as a result, with fears compounded by HMRC’s decision last month to revoke the tax-efficient status of the Oxford VCTs for a separate rule breach.

In a statement sent to members, the Association of Investment Companies said: “As currently drafted, the legislation could be read to say that a VCT paying dividends out of reserves created from the reduction of share premium or capital, to any shareholder allotted shares on or after 6 April 2014, will lose status.

“The loss of status would arise irrespective of when the reserve was created.”

The AIC said the above interpretation contrasts with earlier indications of how the provisions on return of capital were intended to operate.

“Previous policy statements had indicated that the new restrictions, and potential for a loss of status, would only apply to payments made out of funds raised on or after 6 April 2014,” it added.

In response, the Treasury told the AIC, it would seek to make “a minor amendment to the legislation”.


Tag Box

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Rail strikes: Your travel and refund rights

Thousands of railway workers will strike across three days this week, grinding much of the transport system to...

How your monthly bills could rise as the base rate reaches 1.25%

The Bank of England has raised the base rate to 1.25% as predicted – the fifth consecutive rise in just six ...

Low-income pensioner? You could gain £3k top-up

Hundreds of thousands of retirees struggling with a low income are missing out on Pension Credit worth £3,300...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week