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HMRC internal manual

Venture Capital Schemes Manual

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HM Revenue & Customs
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VCT: investor CG disposal relief: share identification rules

TCGA92/S151A (4) & (5)

As shown in the example in VCM52060 not all the ordinary shares the taxpayer owns in a VCT may qualify for CGT exemption. If a taxpayer disposes of some but not all of the shares they own it will be necessary to identify whether the disposal is exempt. The usual share identification rules are disapplied. Instead disposals are identified:

  • first, against shares acquired before the company was approved as a VCT, TCGA92/S151A(5)
  • second, against shares acquired after the company was approved as a VCT on a ‘first in first out’ basis, TCGA92/S151A(4)(a).

In relation to shares acquired on the same day, shares acquired in excess of the permitted maximum are treated as disposed of before other shares acquired on that day, TCGA92/S151A (4)(b). See also VCM52100.

As explained in VCM52050 the share pooling rules are only disapplied for shares which carry CGT relief on disposal. In order to apply the identification rules above it will be necessary to keep a record of the dates on which shares included in the TCGA92/S104 holding were actually acquired. This is because:

  • the Section 104 holding may include shares acquired before and after the company was approved as a VCT,
  • the pooled shares acquired after the company was approved as a VCT may have been acquired at different times.

The identification rules are illustrated in the examples in VCM52080 and VCM52090.