Income Tax: Venture Capital Trusts - returns of information
Published 9 December 2016
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Who is likely to be affected
Venture Capital Trusts (VCTs).
General description of the measure
Regulations will be amended to update the information VCTs must provide after the end of an accounting period and increase the record keeping requirement to 10 years. A new standardised format for the return will be introduced which VCTs will be able to submit electronically.
Policy objective
The objective is to collect relevant information in a standardised electronic format from VCTs about their activities in an accounting period. HM Revenue and Customs (HMRC) will use the information for a variety of purposes, including monitoring compliance and monitoring and supporting the evaluation of the VCT scheme for domestic policy and EU state aid purposes. The record keeping requirement will be extended to 10 years to meet EU regulations.
Background to the measure
VCTs must provide HMRC with a return of certain information within 12 months of the end of an accounting period. The information is specified in regulations. The regulations need to be amended to reflect rule changes introduced by Finance (No. 2) Act 2015 and to collect more information about how VCTs manage their funds.
VCTs presently make their returns on paper in a non-standardised format. HMRC is consulting informally with the VCTs on the new returns process which will use a standard format that can be submitted electronically. There has been no public consultation process given the limited number of companies affected.
Detailed proposal
Operative date
The new information requirements will take effect for VCTs whose accounting period ends on or after 31 December 2016.
Current law
Current law is contained in Part 6 of the Income Tax Act (ITA) 2007 and Part 4 of the Venture Capital Trust Regulations 1995 (SI 1995/1979).
Proposed revisions
Regulation 22 of the Venture Capital Trust Regulations 1995 will be amended. The amendments will require a VCT to provide details of:
- the VCT’s fund manager
- the investments made by a VCT, and how each investee company complies with the conditions in Chapter 4 of Part 6 ITA 2007 (Qualifying holdings)
- any non-statutory view already provided by HMRC of an investee company’s eligibility under Chapter 4 of Part 6 ITA 2007
New Regulation 22A will be inserted in Part 4 of the Venture Capital Trust Regulations 1995. Regulation 22A will require VCTs to provide details about protected monies held by a VCT and any investments made using protected monies.
Regulation 23 will be amended to increase the record keeping requirement from 6 years to 10 years.
Summary of impacts
Exchequer impact (£m)
| 2016 to 2017 | 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 |
|---|---|---|---|---|---|
| nil | nil | nil | nil | nil | nil |
This measure is not expected to have an Exchequer impact.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
There is no impact on individuals, households and families.
The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
The changes to the schemes are not likely to change the impacts of this measure on any group. After careful consideration, the government has concluded that there are no significant impacts on groups of people sharing protected characteristics differently to other groups, and has not identified any equalities impacts.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on businesses as it will affect fewer than 90 VCTs. One-off costs include familiarisation with the new rules. On-going costs include collecting additional information and providing this information to HMRC in a new standard format and keeping records for an additional 4 years.
There is expected to be no impact on small and micro businesses and civil society organisations.
Operational impact (£m) (HMRC or other)
Work is underway to provide a digital process for VCTs to make their returns of information.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The relevance of the information collected will be kept under review as part of the process for monitoring the VCT scheme.
Further advice
If you have any questions about this change, please contact Cathy Wilson on Telephone: 03000 536678 or email: venturecapitalschemes.policy@hmrc.gsi.gov.uk.
Declaration
Jane Ellison MP, Financial Secretary to the Treasury has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.