Income Tax Act 2007 Schedule 2 paragraph 62

Loss of relief if shares disposed of within 5 years

Paragraph 62 of Schedule 2 modifies the rules on loss of VCT income tax relief for early share disposals, applying different holding periods and clawback calculations depending on when the shares were originally issued.

• For shares issued before 6 April 2006, the holding period that triggers a clawback of relief is reduced from 5 years to 3 years.
• For those pre-April 2006 shares, the amount of relief withdrawn is calculated by reference to the full disposal proceeds multiplied by the higher rate of income tax for the year the shares were issued, rather than being based on 30% of the proceeds.
• For shares issued before 6 April 2004, the savings rate of income tax is used in the clawback calculation instead of the higher rate.
• These transitional rules preserve the tax treatment that applied at the time the shares were originally acquired, reflecting changes in VCT relief rates and holding periods over successive Finance Acts.