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HMRC internal manual

Venture Capital Schemes Manual

CVS: deferral relief: introduction

FA00/SCH15/PARA73 to PARA88

Where a qualifying investing company disposes of shares to which investment relief is attributable and a chargeable gain arises on the disposal, the company may defer paying tax on the gain if it makes a qualifying investment (see VCM93020). CVS has been withdrawn for shares issued after 31 March 2010. Deferral relief as detailed below will therefore only apply to shares purchased on or before this date. It does not matter if the investment relief is withdrawn in full on account of the disposal, but the shares must have been held continuously by the company since they were issued.

‘Disposal’, ‘disposing’ etc have the same meaning as they have in the TCGA92. But, in addition, shares to which investment relief is attributable are also treated as disposed of in certain circumstances where they would otherwise be retained and not treated as disposed of under any TCGA92 provision (see VCM93080 and VCM93090). This treatment applies not only for CVS purposes but also for the purposes of CT on chargeable gains.

Note that a chargeable gain which has already been deferred under the CVS, and which is revived on the occurrence of a chargeable event in relation to those shares (see VCM93040), can be deferred again if another qualifying investment is made.

The rules governing the CVS deferral relief are similar to those that apply for EIS, except that CVS deferral relief can be obtained only in respect of investments for which CVS investment relief is also obtained. One point to note is that there is no provision for postponement of tax pending the subscription and issue of eligible shares. A claim can only be submitted once a form CVS3 is held by the investing company (see VCM91030). A claim should provide details of:

  • the amount paid on subscription for the shares,
  • the company in which the investment has been made,
  • the date the shares were issued,
  • the HMRC office which deals with the issuing company and that company’s tax reference,
  • the chargeable gains against which deferral relief is claimed.

If the investing company is unable to provide these details and cannot produce the CVS3 itself, no deferral relief can be allowed in relation to that particular investment. A claim must be made within six years from the end of the accounting period in which the eligible shares are issued.