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HMRC internal manual

Venture Capital Schemes Manual

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HM Revenue & Customs
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VCT: VCT winding-up: exemption from CGT

SI2004/2199 Regulation 6: TCGA92/S151A & S151B

Disposals during the prescribed winding-up period

Subject to certain conditions being satisfied, individuals who invest in VCTs are exempt from capital gains tax (CGT) on gains that arise on the disposal of ordinary shares in VCTs (VCM52020). Regulation 6 of SI2004/2199 preserves that exemption in relation to disposals of shares in a VCT-in-liquidation (VCM56010) that take place during its prescribed winding-up period (VCM56020).

This effect is achieved by applying the provisions of TCGA92/S151A & S151B during the prescribed winding-up period as if the conditions in ITA07/S274(2) (VCM54020) were satisfied and as if the VCT-in-liquidation were still a VCT.

Disposals after the end of the prescribed winding-up period

Regulation 6 extends the CGT exemption only for ordinary shares in a VCT-in-liquidation that are disposed of during the company’s prescribed winding-up period.

If, immediately following the end of the prescribed winding up period:

  • the VCT-in-liquidation still exists, but
  • the conditions for approval set out in ITA/S274(2)are not met,

then for the purposes of the CGT exemption the VCT-in-liquidation is treated as having had its approval withdrawn immediately following the end of that period.

The effects of this treatment in relation to shares that would, were it not for the withdrawal of the approval, be eligible for the exemption, are that:

  • investors are treated as though they had sold and immediately re-acquired these shares at their market value at the end of the prescribed winding-up period - thus ensuring that the exemption applies in relation to any gain or loss that is referable to the period of ownership of the shares prior to that time, and
  • subsequent disposals of the shares by the investors will give rise to chargeable gains or allowable losses, calculated by reference to the deemed re-acquisition cost.