Northern 3 VCT PLC Application Form - Clubfinance
Northern 3 VCT PLC Application Form - Clubfinance
Northern 3 VCT PLC Application Form - Clubfinance
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Part III – Taxation<br />
<strong>VCT</strong>s:Summaryoftheapplicablelegislationinrespectofinvestors<br />
1. Taxationofa<strong>VCT</strong><br />
<strong>VCT</strong>sareexemptfromcorporationtaxonchargeablegains.Thereisnorestrictiononthedistributionofrealisedcapitalgainsbya<strong>VCT</strong>,subjecttothe<br />
requirementsofcompanylaw.TheCompanywillbesubjecttocorporationtaxonitsincome(excludingdividendsreceivedfromUKcompanies)after<br />
deductionofattributableexpenses.<br />
2. Taxreliefsforindividualinvestors<br />
IndividualswhosubscribeforOfferSharesmustbeaged18orovertoqualifyforthetaxreliefsoutlinedbelow.<br />
Relieffromincometax<br />
Aninvestorsubscribingupto£200,000inthe2011/12taxyearforeligiblesharesina<strong>VCT</strong>willbeentitledtoclaimincometaxrelief,attherateof30%,<br />
althoughthisreliefwillbewithdrawnifeitherthesharesaresoldwithinfiveyearsortheinvestortakesoutaloanwhichwouldnothavebeenmade,or<br />
wouldnothavebeenmadeonthesameterms,savefortheacquisitionofsuchshares.Reliefisrestrictedtotheamountwhichreducestheinvestor's<br />
incometaxliabilitytonil.However,taxcreditsondividendsarenotionalandcannotberepaidand,therefore,investorsshouldtakethisintoaccount<br />
whencalculatingthevalueoftheincometaxrelief.<br />
Claimingincometaxrelief<br />
InvestorswillreceiveacertificatefromtheCompanywithin30daysoftheirSharesbeingissued,whichwillenablethemtoclaimthetaxrelief.Income<br />
taxreliefcanbeclaimedbyanInvestorwritingtotheirHMRevenue&Customsoffice,requestingthattheirtaxcodebeamended,sothatthetaxrelief<br />
isreceivedeachmonththroughthePAYEsystem.Investorswhopaytheirtaxininstalmentsmaybeabletoapplyforareductionintheirpaymentson<br />
account.Alternatively,anInvestorcanclaimthereliefthroughtheirtaxreturninrespectofthetaxyearinwhichtheShareshavebeensubscribed.<br />
Dividendrelief<br />
Aninvestorwhosubscribesfororacquireseligiblesharesina<strong>VCT</strong>(uptoamaximumof£200,000inthe2011/12taxyear)willnotbeliableforUK<br />
incometaxondividendspaidbythe<strong>VCT</strong>.Theincomereceivedbythe<strong>VCT</strong>willusuallyconstituteeitherinterest(onwhichthe<strong>VCT</strong>maybesubjecttotax)<br />
or dividends from UK companies (on which the <strong>VCT</strong> would not be subject to tax). The <strong>VCT</strong>'s income, reduced by the payment of tax (if applicable)<br />
togetherwithitsrealisedcapitalgains,canthenbedistributedtaxfreetoinvestorswhobenefitfromthisdividendrelief.Thereisnowithholdingtaxon<br />
dividendspaidbyaUKcompanyandconsequentlytheCompanydoesnotassumeresponsibilityforthewithholdingoftaxatsource.Dividendscarrya<br />
taxcreditattherateofoneninthofthenetdividendwhichisnotrepayableandwhichcannotbeutilisedinanyotherway.<br />
Capitalgainstaxrelief<br />
Adisposalbyanindividualinvestorofhissharesina<strong>VCT</strong>willgiverisetoneitherachargeablegainnoranallowablelossforthepurposesofUKcapital<br />
gainstax.Thisreliefisalsolimitedtodisposalsofsharesacquiredwithinthe£200,000limitdescribedabove.<br />
Lossoftaxreliefs<br />
(i) Ifacompanywhichhasbeengrantedapprovalorprovisionalapprovalasa<strong>VCT</strong>subsequentlyfailstocomplywiththeconditionsforapproval,<strong>VCT</strong><br />
statusmaybewithdrawnortreatedasneverhavingbeengiven.Theexemptionsfromcorporationtaxoncapitalgainswillnotapplytoanygain<br />
realisedafter<strong>VCT</strong>statusislost(nortoanygainrealisedbythe<strong>VCT</strong>ifapprovalisdeemednevertohavebeengiven).<br />
(ii) Forinvestors,thewithdrawalof<strong>VCT</strong>statusmay(dependinguponthetimingofsuchwithdrawal)resultin:<br />
repaymentofthe30%incometaxreliefonsubscriptionfornew<strong>VCT</strong>shares;<br />
incometaxbecomingpayableonsubsequentpaymentsofdividendsbythecompany;and<br />
aliabilitytotaxoncapitalgainsbeingsufferedinthenormalwayonthedisposalofsharesinthecompany,exceptthat anypartofthegain<br />
attributabletotheperiodforwhichthe<strong>VCT</strong>wasapprovedwouldbeexempt.<br />
(iii) Theconsequencesforinvestorsinacompanywhichneverobtainsfullunconditionalapprovalasa<strong>VCT</strong>areasfollows:<br />
repaymentofthe30%incometaxreliefonsubscriptionsfornew<strong>VCT</strong>sharesandinterestonoverduetaxmayarise;<br />
incometaxbecomingpayableonallpaymentsofdividendsbythecompany;and<br />
anygainarisingonadisposaloftheshareswouldbeliabletocapitalgainstaxandlossesontheshareswouldbeallowablelossesforcapitalgains<br />
taxpurposes. <br />
TheOfferSharesareeligible<strong>VCT</strong>sharesforthepurposesofthissection.<br />
3. ConsequencesofaninvestordyingoratransferofSharesbetweenspouses<br />
(i) Initialincometax<br />
Ifaninvestordiesatanytimeaftermakinganinvestmentina<strong>VCT</strong>,thetransferofsharesondeathisnottreatedasadisposaland,therefore,the<br />
initialincometaxreliefisnotwithdrawn.However,theshareswillbecomepartofthedeceased'sestateforinheritancetaxpurposes.<br />
(ii) Taximplicationsforthebeneficiary<br />
Providedanumberofconditionsaremet,thebeneficiaryofany<strong>VCT</strong>shareswillbeentitledtotaxfreedividendsandwillnotpaycapitalgainstax<br />
onanydisposal,butwillnotbeentitledtoanyinitialincometaxrelief.<br />
(iii) Transferofsharesbetweenspouses<br />
Transfersofsharesina<strong>VCT</strong>betweenspousesisnotdeemedtobeadisposalandthereforealltaxreliefswillberetained.<br />
4. General<br />
(i) InvestorswhoarenotresidentintheUK<br />
Nonresidentinvestors,orinvestorswhomaybecomenonresident,shouldseektheirownprofessionaladviceastotheconsequencesofmaking<br />
aninvestmentintheCompany,becausetheymaybesubjecttotaxinotherjurisdictions.<br />
(ii) Stampdutyandstampdutyreservetax<br />
Nostampdutyor(unlesssharesina<strong>VCT</strong>areissuedtoanomineeforaclearingsystemoraproviderofdepositoryreceipts)stampdutyreservetax<br />
willbepayableontheissueofsuchshares.Thetransferonthesaleofshareswouldnormallybesubjecttoadvaloremstampdutyor(ifan<br />
unconditional agreement to transfer such shares is not completed by a duly stamped transfer within two months) stamp duty reserve tax<br />
generally,ineachcaseattherateof50pforevery£100orpartof£100oftheconsiderationpaidwherethetotalconsiderationexceeds£1,000or<br />
ifitformspartofaseriesoftransactionswherethetotalconsiderationexceeds£1,000.Suchdutieswouldbepayablebyapersonwhopurchases<br />
suchsharesfromtheoriginalsubscriber.<br />
(iii) Purchasesinthemarketafterlisting<br />
Any subsequent purchaser of existing <strong>VCT</strong> shares, as opposed to a subscriber for new <strong>VCT</strong> shares, will not qualify for income tax relief on<br />
investmentbutmaybenefitfromdividendreliefandfromcapitalgainstaxreliefonthedisposalofhis<strong>VCT</strong>shares.<br />
(iv) The<strong>VCT</strong>Regulations2004<br />
The<strong>VCT</strong>Regulationscameintoforceon17October2004.Underthe<strong>VCT</strong>Regulations,moniesraisedbyanyfurtherissueofsharesbyanexisting<br />
<strong>VCT</strong>mustbeappliedbythat<strong>VCT</strong>forqualifyingpurposes.Ifanyofthemoneyraised(exceptforamountswhichHMRevenue&Customsagreesare<br />
insignificantinthecontextofthewholeissuedordinarysharecapitalofthe<strong>VCT</strong>)isusedbythe<strong>VCT</strong>topurchaseitsownsharesthenthefundsmay<br />
bedeemedtonothavebeenusedforaqualifyingpurpose.<br />
<br />
Theaboveisonlyasummaryofthetaxpositionofindividualinvestorsin<strong>VCT</strong>sandisbasedontheCompany’sunderstandingofcurrentlawand<br />
practice.Investorsarerecommendedtoconsultaprofessionaladviserastothetaxationconsequencesoftheirinvestingina<strong>VCT</strong>.Alltaxreliefs<br />
referredtointhisdocumentareUKtaxreliefsandaredependentoninvesteecompaniesmaintainingtheir<strong>VCT</strong>qualifyingstatus.<br />
<strong>Northern</strong> 3 <strong>VCT</strong> <strong>PLC</strong> 9
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