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HMRC internal manual

Venture Capital Schemes Manual

VCT: VCT winding-up: deferral relief

SI2004/2199 Regulation 7; TCGA92/SCH5C/PARA3


TCGA92/SCH5C allows individuals to claim a deferral of capital gains where they are issued with eligible shares (before 6 April 2004) in a VCT (VCM53010) in respect of which they obtain ‘front end’ income tax relief. Loss of approval of that company as a VCT would, in the absence of any specific provision, cause any such deferred gains to be brought back into charge (VCM53090).

Deferral relief during the prescribed winding-up period

Regulation 7 of SI2004/2199 ensures that the winding-up of a VCT does not of itself trigger an immediate revival (or crystallisation) of deferred gains. It achieves this by providing that for the purposes of determining whether a chargeable event occurs during the prescribed winding-up period (VCM56020) of a VCT-in-liquidation (VCM56010):

  • it will continue to be treated as a VCT (if it is not a VCT), and
  • any withdrawal of approval during that period is disregarded.

So any deferred gains will continue to be deferred until some other chargeable event occurs, despite the winding-up of the VCT against whose shares the deferral relief was claimed, and the possible withdrawal of approval from the VCT-in-liquidation.

In this context any capital distribution made in respect of shares during the course of the winding-up of a VCT-in-liquidation is treated as a disposal of an interest in those shares (CG57800 onwards) and would cause any chargeable gain that had been deferred in respect of the investment in those shares to be brought back into charge (TCGA92/SCH5/PARA3 (1)(a)).

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Deferral relief at the end of the prescribed winding-up period

If a VCT-in-liquidation is still in existence immediately following the end of its prescribed winding-up period any remaining deferred gains that relate to those shares are brought back into charge at that time.