Income Tax Act 2007 section 266

Loss of relief if shares disposed of within 5 years

Section 266 deals with the reduction or withdrawal of VCT income tax relief when an investor disposes of shares within five years of their issue.

• If VCT shares are sold or otherwise disposed of within five years of issue, the income tax relief originally claimed may be reduced or completely withdrawn
• Disposals not at arm's length (e.g. gifts or transfers below market value) result in full withdrawal of the relief
• Arm's length disposals allow partial retention of relief, reduced by 30% of the sale proceeds received
• Where only some shares of a class are disposed of, earlier-acquired shares are treated as sold first, and shares without VCT relief are treated as sold before those with relief