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HMRC internal manual

Venture Capital Schemes Manual

VCT: VCT mergers: overview

ITA07/S280, S282 and Ss314-325; SI2004/2199

The Venture Capital Trust (Winding up and Mergers) (Tax) Regulations 2004 (SI2004/2199) include regulations that provide protection for a VCT and its investors if it merges with another VCT. Prior to the introduction of SI2004/2199 the merger of two or more VCTs would almost certainly have resulted in the loss of approval of the VCTs involved, since the qualifying holdings of one would not be treated as qualifying holdings of the other(s) (VCM55010).

SI2004/2199 seeks to ensure that where there is a merger of two or more VCTs, both the investors’ and the VCTs’ tax reliefs will be unaffected. Broadly speaking it does this by making certain provisions that apply where qualifying holdings and eligible shares are transferred during the course of, or in consequence of, the merger of the VCTs (VCM57020). These provisions secure that those investments can continue to be regarded as qualifying holdings or eligible shares in the hands of the company that acquires them as a result of the merger (VCM57060).