The Venture Capital Trust (Amendment) Regulations 2016 amend the Venture Capital Trust (VCT) Regulations with effect from 29 December 2016. The amendments have effect for periods that end on or after 31 December 2016 and significantly increase the amount of information that is required to be contained in the annual regulation 22 return that VCTs must file with HMRC.
The annual return will require the following additional information:
- For disposals made in the period, the value at which the investment was disposed of;
- The name and address of the fund manager(s) of the VCT during the period (and the Financial Services Register reference number of the manager(s)); and
- For new investments made in the period:
- The value of the gross assets of the investee company (or group) immediately prior to the new VCT investment being made;
- The total amount raised by the investee company under the various venture capital schemes (for example, the VCT scheme, EIS, SEIS and similar schemes) at the date of the VCT investment less the value of the new investment made by the VCT;
- A description of each qualifying activity that the VCT funds are intended to be used for;
- At the date of the VCT investment, the number of full-time equivalent employees of the investee company (or group);
- Whether or not the investee company obtained an advance assurance from HMRC that an investment in the company would likely represent a qualifying holding and, if so, the date of that assurance;
- If the investment was made after the end of the initial investing period (seven years from the date of the relevant first commercial sale or ten years if the investee company is a knowledge-intensive company), which of the conditions outlined in s280C of the Income Tax Act 2007 permitted the investment to be made and the date of the relevant first commercial sale; and
- If the company invested in was a knowledge-intensive company at the date of the investment, whether the total amount raised by that company under the various venture capital schemes at that date exceeded £12 million, whether the investment was made more than seven years after the date of the relevant first commercial sale and whether the number of full-time equivalent employees exceeded 250. It appears that even if none of the more generous limits applicable in respect of a knowledge-intensive company are being relied on, HMRC could still expect the VCT to indicate whether the investee company was a knowledge-intensive company. In certain circumstances, this may not be straightforward to establish.
If, on the last day of the period in question, a qualifying holding of a VCT is only capable of being treated as a qualifying holding because it had been acquired through the use of monies raised during the period 6 April 1995 to 5 April 2008 (or monies derived from investments that were made using funds raised within that period), additional information will be required under a new regulation 22A of the VCT Regulations.
Similarly, if on the last day of the period, a VCT holds money that is derived from the investment of funds that it raised between 6 April 1995 and 5 April 2008 and the VCT maintains information for the purpose of enabling it to make future investments that would not otherwise be capable of constituting qualifying holdings, the VCT must also provide additional information.
We envisage that it could prove challenging for some VCTs and their managers to provide the additional information that is now required. Therefore, we recommend that early consideration is given to how this information will be sourced.
The VCT Regulations are also amended so that the period that VCTs must keep records for is increased from six years to ten years from the end of the period in question.
It is still anticipated that the annual regulation 22 return will be required to be submitted in electronic format in due course. However, this has not been mandated yet.
For further information please contact :