View more on these topics

Martin Churchill: Tax-efficient briefing

A number of VCTs have launched linked tender and enhanced buyback offers. These allow investors who are interested in committing to being invested for a further five years to effectively swap out their current holding for new shares on which they can claim the up front 30 per cent income tax relief.

This is not an exit opportunity for investors as all the proceeds must be reinvested in new shares.

This approach should in our view be considered by all investors who:
1. Have held the shares for at least five years (to avoid any up front tax relief being withdrawn)
2. Can commit the funds for another five years to an investment in the VCT (as new shares carry a five year minimum holding period to avoid the up front tax relief being withdrawn)
3. Have not fully utilised their annual £200,000 VCT allowance for the tax year in which they are asking for the new shares to be issued
4. Have not deferred capital gains tax when purchasing the original shares, as CGT can no longer be deferred by investing in VCT shares (CGT could be deferred for VCT shares purchased new up to April 5, 2004)

At present, it appears that HMRC has no objection to these offers but it may be that this approach changes in the future as it could be viewed as costing the Exchequer more tax relief but without any further funds being committed to the VCT sector.

In the future, HMRC could restrict the size of offers to a percentage of issued share capital, whereas at present there is no limit.

There are two alternative ways of allowing shareholders to sell their shares back to the company at a higher price than would normally be possible through a normal buyback – a tender offer and an enhanced share buyback offer.

Under a tender offer, qualifying shareholders may apply to sell existing shares back to the company at the tender price with the sale proceeds used to subscribe for new shares.

Accordingly, there is no requirement for any subscription monies to be sent by participating qualifying shareholders to the VCT. There is no exit opportunity.

Under an enhanced share buyback, an agent of the VCT will acquire existing shares from participating qualifying shareholders. The net proceeds of the sale of the existing shares are applied to subscribe for new shares.

Accordingly, there is no requirement for any subscription monies to be sent by participating qualifying shareholders to the VCT. There is no exit opportunity.

Martin Churchill is the editor of Tax Efficient Review


Aviva distribution director Dean Lamble quits

Aviva director of distribution development Dean Lamble has left the firm. Lamble took on the role in 2010 having previously been head of strategy at the pension provider. An Aviva spokeswoman says: “Dean Lamble, director of distribution development at Aviva, has decided to leave the organisation to pursue a career outside the group. “He has […]


SFO swoops on bio-fuel firms in £32m collapse

Sipp investors are facing losses of up to £32m after the Serious Fraud Office appointed administrators to wind up a number of related “sustainable” investment companies. Southwark Crown Court issued a freezing order last month on assets held by Sustainable Agroenergy Plc, Sustainable Wealth Investments (UK) Limited and Sustainable Growth Group (UK) Limited after a […]

FSA bans and fines mortgage broker over £1.3m fraud

The FSA has banned and fined a mortgage broker for failing to act with integrity. Gareth Flanagan, of GMF Marketing Services, based in Londonderry, Northern Ireland has been fined £95,200 and banned from today. He has received a 30 per cent reduction in his fine, which would havce been £136,000, for settling early. The FSA […]


Resolution outlines Friends split sell-off plans

Resolution has set out proposals to split Friends Life into two separately listed businesses which could be sold off on their own. As part of its 2011 results, published today, the consolidation firm says it will continue to look for exit options involving mergers and acquisitions but it also needs a “self managed” exit option. […]

Benefits - thumbnail

Global benefits predictions for 2015 from Jelf International

According to Doug Rice, managing director of international services, in 2015, managing their international duty of care will become an increasing focus for UK-based overseas organisations in both managing their short- and longer-term challenges. As a result, strong independent advice and innovative technological solutions will become more important than ever in managing their global benefits.


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm