Downing Planned Exit VCT 2 - G Shares - The Tax Shelter Report
Downing Planned Exit VCT 2 - G Shares - The Tax Shelter Report
Downing Planned Exit VCT 2 - G Shares - The Tax Shelter Report
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<strong>Tax</strong>ationBenefitstoInvestors(seePartIIforfurtherdetails)<br />
<br />
<strong>The</strong>principalUK<strong>VCT</strong>taxreliefs,whichareavailableonamaximuminvestmentof£200,000perindividualineachofthe2012/13<br />
and2013/14taxyears,aresetoutbelow:<br />
Income tax relief at 30% of the amount subscribed provided the <strong>VCT</strong> shares are held for at least five years. Relief is<br />
restrictedtotheamountwhichreducestheInvestor'sincometaxliabilitytonil.<br />
<strong>Tax</strong>freedividendsandcapitaldistributionsfroma<strong>VCT</strong>.<br />
Capitalgainstaxexemptiononanygainsarisingonthedisposalof<strong>VCT</strong>shares.<br />
<br />
<strong>The</strong>tablebelowshowstheeffectoftheinitialincometaxreliefusinganassumedgrossissuepriceof105.82pperGShare.<strong>The</strong><br />
actualissuepricewillbedeterminedbythePricingFormuladescribedonpage19.<br />
<br />
Effectofinitial30%incometaxrelief<br />
<br />
Costofinvestment PerGShare<br />
GrosssubscriptionbyInvestor<br />
105.82p<br />
30%incometaxrelief<br />
(31.75p)<br />
<br />
Netoftaxcostofinvestment<br />
74.07p<br />
<br />
Initialvalueofinvestment<br />
GrosssubscriptionbyInvestor<br />
Assumedissuecostsof5.5%<br />
<br />
<br />
105.82p<br />
(5.82p)<br />
InitialNetAssetValue 100.00p<br />
<br />
Initial"uplift"(pence)<br />
+25.93p<br />
<br />
Initial"uplift"(%)<br />
+35.00%<br />
<br />
<strong>The</strong>abovetableshowsthat,assumingincometaxreliefisreceivedat30%,theInvestor'snetoftaxcostofinvestmentis74.07pperGShareand<br />
theinitialNAVis100p,an"uplift"of25.93pperGShareor+35%.InvestorsshouldnotethattheyarerequiredtoholdtheG<strong>Shares</strong>foratleast<br />
fiveyearsinordertoretainthefullamountofincometaxreliefand,assuch,thisinitialupliftcannotbeimmediatelyrealised.<br />
<br />
<br />
ThisisonlyaverybriefsummaryoftheUKtaxpositionofinvestorsin<strong>VCT</strong>s,basedontheCompany'sunderstandingofcurrent<br />
lawandpractice.FurtherdetailsaresetoutinPartIIofthisdocument.PotentialInvestorsarerecommendedtoconsulttheir<br />
ownappropriateprofessionaladvisersastothetaxationconsequencesoftheirinvestingina<strong>VCT</strong>.Inaddition,theavailabilityof<br />
taxreliefsdependsontheCompanymaintainingits<strong>VCT</strong>qualifyingstatus.<br />
<br />
<br />
Income<br />
<br />
<strong>The</strong>Boardhasastatedobjectiveofpayinganannualdividendofatleast5pperGShare,subjecttotheavailabilityofsufficient<br />
distributable profits and capital resources. Set out below is a table illustrating the returns to G Shareholders assuming annual<br />
dividendsof5pperGSharearepaid.Investorsshouldnotethatthetargetannualdividendof5pperGShareisanobjectiveand<br />
isnotguaranteed.<br />
<br />
IllustrativeyieldperGShare(after30%incometaxrelief)<br />
Netoftax<br />
Targetannual<br />
<strong>Tax</strong>free<br />
Grossequivalentyield<br />
offerprice 1<br />
dividends<br />
yield<br />
toa40%taxpayer 2 <br />
<br />
74.07p 5.0p 6.75%p.a. 9.00%p.a.<br />
<br />
1<br />
2<br />
<strong>The</strong>returnslistedafter30%incometaxreliefarebasedonanassumedgrossissuepriceof105.82pperGSharemultipliedby70%,toreflect<br />
theinitialincometaxreliefof30%.Investorsshouldnotethattheywillberequiredtopaythefullissuepriceandclaimtheincometaxrelief<br />
separately.<br />
<strong>The</strong>grossequivalentyieldistheyieldonanon<strong>VCT</strong>UKdividendthatwouldresultinanetyieldof6.75%(beinga5pdividenddividedby<br />
74.07p,theassumedissuepriceof105.82pperGShareless30%toreflectinitialincometaxrelief),assuminga40%taxpayer.<br />
<br />
<strong>The</strong>firstdividendinrespectoftheG<strong>Shares</strong>istargetedtobe5pperGSharepayableinNovember2013.<strong>The</strong>reafter,dividendsof<br />
2.5pperGSharearetargetedtobepaidbiannuallyaroundtheendofJulyandNovembereachyear.<br />
4
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