Income Tax Act 2007 section 264A

Restricting relief where there is a linked sale

Section 264A restricts the amount of VCT income tax relief available when an individual subscribes for shares in a Venture Capital Trust but has also sold shares in the same or a related VCT around the same time.

• Where an individual subscribes for VCT shares and has made a linked sale of other VCT shares, the amount eligible for income tax relief is reduced by the total sale proceeds of those linked sales, though not below nil
• A sale is "linked" if the sold shares are in the same VCT (or a successor or predecessor VCT) and either the sale and subscription were conditional upon each other, or they took place within six months of each other
• Successor and predecessor VCTs include companies involved in formal VCT mergers or restructurings, but the linked sale rules only apply to these where the merger or restructuring occurred before the subscription, or within two years after it if the investor could reasonably have anticipated it or if a main purpose was to obtain a tax advantage
• The restriction does not apply where the subscription for new shares results from the individual reinvesting dividends received on existing shares in the same VCT