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HMRC withdraws approval for Oxford Technology VCTs after rule breach

HM Revenue & Customs has withdrawn venture capital trust approval for the Oxford Technology 3 VCT and the Oxford Technology 1VCT after they breached rules for holding more than 15 per cent of their funds in one firm.

A London Stock Exchange ann-ouncement last week revealed that the company reported the breach to HMRC last October and that the withdrawals mean it has lost all tax benefits offered by VCT status.

This is the first time HMRC has withdrawn VCT approval. Oxford Technology wrote to Chancellor George Osborne in January in an attempt to stop the withdrawal.

It also claimed HMRC had advised the firm on how to circumvent the 15 per cent rules in previous communications.

The firm stated that OT3VCT and OT1VCT had invested £400,000 and £491,000 respectively in start-up company Scancell by August. When the shares were bought, this accounted for less than 10 per cent of the VCTs’ capital but a jump in Scancell’s share price caused a breach of the 15 per cent rule.

According to FE data, the OT3VCT trust held £4.4m as of last month while the OT1VCT held £4.1m.

The withdrawal means that the company is no longer exempt from corporation tax on chargeable gains, will lose any “front end” tax relief on shares issued within five years of the withdrawal and will lose any deferred tax gains.

It will also lose tax relief on dividends and disposals of shares. The company intends to appeal the decision.

A statement says: “In the event the appeal is not succ-essful, the directors of the company will need carefully to review the company’s options and consider its future as a listed company, which may lead to a cancellation of admission to the London Stock Exchange.”

Charles Stanley Direct head of investment research Ben Yearsley says: “Regardless of the movement in share price, if the firm had invested less money into Scancell, it would not be in this position. 

“This situation could have been avoided.”

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