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HMRC internal manual

Venture Capital Schemes Manual

VCT: investor CG deferral relief: interaction with disposal relief

Subscriptions for shares on which deferral relief could be claimed also counted towards the permitted maximum of £100,000 on which disposal relief is available, VCM52040. But there was a separate £100,000 limit for the purposes of claiming deferral relief only. In the extreme case an investor could buy £100,000 worth of shares in a VCT from a previous holder of the shares. These shares would be exempt from CGT when they were disposed of but would not qualify for deferral relief because they were purchased and not subscribed for. The investor would have used up their permitted maximum for the year. Later in the same year they could subscribe for £100,000 worth of shares in a VCT. These shares would not be exempt from CGT when they were sold, because they were acquired in excess of the permitted maximum. But assuming the investor received some ‘front-end’ income tax relief on the investment, the expenditure on the shares subscribed for would qualify for CGT deferral relief.


In the tax year 1996-97 an investor makes the following acquisitions of shares in approved VCTs:

  • May 1996 buys 30,000 shares in A plc, cost £55,000.
  • September 1996 subscribes for 50,000 shares in B plc, cost £75,000. The investor receives ‘front-end’ income tax relief on this investment.

The 30,000 A plc shares bought in May 1996 and £45,000 worth of the B plc shares subscribed for in September 1996 will be exempt from CGT when they are disposed of. The balance of the shares acquired in September 1996 (£30,000 / £75,000 x 50,000 = 20,000) remain within the charge to CGT. But all the expenditure of £75,000 qualifies for CGT deferral relief.