Venture Capital Schemes Manual

VCM51070 - VCT: investor income tax reliefs: ‘front-end’ income tax relief: PAYE coding

HMRC officers will need to use the coding descriptor Venture Capital Trusts for the ‘front-end’ income tax relief, see PAYE130025. However, once the tax code has been amended there is no coding restriction to claw back any excess relief given.

To calculate the coding allowance for the VCT income tax relief, the HMRC officer needs to refer to the instructions in the PAYE on-line manual at PAYE10075.

Example 1

Where the estimated liability at the lower, basic or higher rates clearly exceeds the amount of relief due, divide the relief due in terms of tax by the taxpayer's highest rate to calculate the coding allowance.

Earnings £40,000 in year of assessment 2026-2027, VCT subscriptions £2,500, allowances PA.

1. Calculate expected liability for the year

Earnings                    £40,000

Less PA                      £12,570

Chargeable               £27,430 @ 20% = £5,486

Liability                      £5,486                                                                                                    

Less VCT relief          £2,500 @ 20% = £500

Tax due                      £4,986             

2. Convert VCT relief to a coding allowance              

  £500 x (100/20) = £2,500                                                                                 

Prove coding allowance  

Earnings                                £40,000

Less PA                                  £12,570

Less VCT                                £2,500

Chargeable                          £24,930 @ 20% = £4,986

Tax payable                       £4,986