Part 6Venture capital trusts
Chapter 2VCT relief
Entitlement to relief
264AF3Restricting relief where there is a linked sale
1
This section applies where—
a
an individual subscribes for shares (“the relevant shares”) in a VCT (“the VCT”), and
b
there is at least one linked sale of other shares by the individual.
2
For the purposes of this Part, the amount the individual subscribes for the shares is to be treated as reduced (but not below nil) by the total consideration given for the linked sales of other shares.
This is subject to subsection (3).
3
If a sale is linked in relation to more than one subscription for shares—
a
the consideration for it is to be applied to reduce subscriptions under subsection (2) in the order in which the subscriptions are made, and
b
accordingly, to the extent that any consideration has been used to reduce an earlier subscription, it is not available to reduce a later one.
4
A sale of shares (“the sold shares”) is “linked” if conditions A and B are met.
5
Condition A is that the sold shares are in—
a
the VCT, or
b
F2if subsection (7A) applies, a company which is (or later becomes) a successor or predecessor of the VCT.
6
Condition B is that—
a
the individual subscribes for the relevant shares in circumstances where—
i
the purchase of the sold shares from the individual was conditional upon the individual subscribing for shares in the VCT, or
ii
the individual's subscription for shares in the VCT was conditional upon that purchase, or
b
the subscription for the relevant shares and the sale of the sold shares are within 6 months of each other (irrespective of which came first).
7
A company (“company X”) is a “successor or predecessor of the VCT” if—
a
there is a merger of two or more companies for the purposes of Chapter 5 (see section 323) and—
i
the VCT is one of the merged companies and company X is “the successor company” (as defined by that section), or
ii
the VCT is “the successor company” and company X is one of the merged companies, or
b
section 327 (effect of restructuring of VCT) applies and—
i
the VCT is “the old company” and company X is “the new company” for the purposes of that section, or
ii
company X is “the old company” and the VCT is “the new company” for those purposes.
F17A
This subsection applies if—
a
the date of the merger or restructuring referred to in subsection (7) (“D2”) is before, or the same as, the date when the individual subscribes for the relevant shares (“D1”), or
b
D2 is after D1 but no more than two years after, and either—
i
the individual could reasonably be expected to know at the time of subscribing for the relevant shares that the merger or restructuring referred to in subsection (7) was likely to take place, or
ii
the main purpose of the merger or restructuring, or one of its main purposes, is to enable individuals to obtain a tax advantage in connection with VCT relief.
7B
For the purposes of subsection (7A)—
a
the date of the merger or restructuring is the date of the issue of shares referred to in section 323(1)(a) or (2)(a) or section 326(2)(a) (or, if there is more than one such issue, the date of the first of them);
b
a “tax advantage” includes—
i
relief or increased relief from tax,
ii
repayment or increased repayment of tax,
iii
avoidance or reduction of a charge to tax or an assessment to tax, and
iv
avoidance of a possible assessment to tax.
8
This section does not apply if, or to the extent that, the subscription for the relevant shares is a result of the individual electing to reinvest dividends payable to the individual on shares in the VCT, in acquiring further shares in the VCT.