What does section 101B of the Taxation of Chargeable Gains Act 1992 do?

Section 101B triggers a deemed disposal and reacquisition at market value of business assets acquired under a no gain/no loss transfer when the holding company becomes an approved venture capital trust. This crystallises any built-in gains for corporation tax purposes immediately before VCT approval takes effect, preventing those gains from escaping tax entirely.

How does the deemed disposal work under section 101B when a company becomes a venture capital trust?

The company is treated as having sold and immediately reacquired the transferred business assets at their market value at the time of the original section 139 transfer. The resulting chargeable gain or allowable loss accrues immediately before the VCT approval takes effect, ensuring it falls within a corporation tax chargeable period.

Does section 101B apply if section 101 has already triggered a deemed disposal on the same assets?

No. If section 101, which applies when a company becomes an investment trust, has already triggered a deemed disposal and reacquisition of the same assets, section 101B does not apply again. This prevents a double tax charge arising on the same built-in gains where a company transitions through investment trust status before becoming a VCT.

What is the time limit for HMRC to assess corporation tax arising under section 101B?

HMRC may raise a corporation tax assessment within six years from the end of the accounting period in which the venture capital trust approval takes effect, regardless of normal time limits. This extended window ensures HMRC can properly assess the deemed gain even where VCT approval takes effect from the start of an accounting period.

Taxation of Chargeable Gains Act 1992 section 101B

Transfer of company's assets to venture capital trust

Section 101B addresses what happens when a company that received business assets on a tax-neutral basis later becomes an approved venture capital trust, triggering a deemed disposal and reacquisition of those assets at market value.

Where a company acquired business assets at no gain/no loss under section 139 and later becomes an approved venture capital trust, it is treated as having sold and immediately reacquired those assets at market value at the time of the original transfer.
Any chargeable gain or allowable loss arising from this deemed disposal is treated as accruing immediately before the date from which the company's venture capital trust approval takes effect.
This section does not apply if the company has already been treated as making a deemed disposal and reacquisition of the same assets under section 101(1), which applies to investment trusts.
Corporation tax assessments arising from this section may be made within six years of the end of the accounting period in which the venture capital trust approval takes effect, regardless of normal time limits.

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