Venture Capital Trust (Amendment) Regulations 2014

The Treasury make the following Regulations in exercise of the powers conferred by sections 272(2) and (3) and 284 of the Income Tax Act 2007.

Citation and commencement

1. These Regulations may be cited as the Venture Capital Trust (Amendment) Regulations 2014 and come into force on 12th August 2014.

Amendments to the Venture Capital Trust Regulations 1995

2.—(1) The Venture Capital Trust Regulations 1995 are amended as follows.

(2) In paragraph (1) of regulation 2 (interpretation) for the definition of “investor” substitute—

““investor” means a person—

(a) who holds or has held shares in a company which is or has been a trust company, or

(b) for whom a nominee holds or has held shares in a company which is or has been a trust company;”.

(3) In regulation 9 (certificate to be given to investor)—

(a) in paragraph (1)—

(i) for “individual” substitute “investor (who is an individual)”, and

(ii) after “whom” insert “(or to whose nominee)”,

(b) in paragraph (2)(c) after “him” insert “(or to his nominee)”, and

(c) in paragraph (3)(a) after “investor” insert “(or to his nominee)”.

(4) For paragraph (1) of regulation 24 (information to be provided to the Board) substitute—

“(1) The Board may by notice require—

(a) any company which is or has been a trust company,

(b) any investor, or

(c) any nominee for an investor,

within such period as may be specified in the notice, to furnish them with such information as they may reasonably require for the purposes of Part 6 or these Regulations.”.

(5) For paragraph (1) of regulation 25 (inspection of records by officer of the Board) substitute—

“(1) The Board may by notice require—

(a) any company which is or has been a trust company,

(b) any investor, or

(c) any nominee for an investor,

within such period as may be specified in the notice, to make available for inspection by an officer of the Board authorised for that purpose such accounts, records and other information as are in that person’s possession or under that person’s control as the Board may reasonably require for the purposes of Part 6 or these Regulations.”.

Mark Lancaster
David Evennett
Two of the Lords Commissioners of Her Majesty’s Treasury
21st July 2014

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations amend the Venture Capital Trust Regulations 1995 (SI 1995/1979) (“the principal Regulations”).

Paragraph 5 of Schedule 10 to the Finance Act 2014 (c. 26) inserted into the Income Tax Act 2007 (c. 3) a new provision (section 330A) which provides that shares in a venture capital trust may be held through a nominee. As a consequence, these Regulations make a number of amendments to the principal Regulations.

Regulation 1 of these Regulations provides for citation and commencement.

Regulation 2 of these Regulations makes the following amendments to the principal Regulations:

(a) the definition of “investor” in regulation 2 of the principal Regulations is amended so as to include persons who hold shares in a venture capital trust through a nominee;

(b) regulation 9 of the principal Regulations is amended to make provision for the giving of certificates containing the specified particulars in cases where shares in a venture capital trust are issued to a nominee for an investor; and

(c) regulations 24 and 25 of the principal Regulations are amended so as to provide that where shares in a venture capital trust are held by a nominee for an investor, both the nominee and the investor may be required to furnish information to the Board or make records available to the Board for inspection.

A Tax Information and Impact Note covering this instrument was published on 10 December 2013 alongside draft legislation for Finance Bill 2014 and is available at www.gov.uk/government/uploads/system/uploads/attachment_data/file/264618/3._Venture_capital_trusts.pdf. It remains an accurate summary of the impacts that apply to this instrument.

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EXPLANATORY MEMORANDUM TO THE VENTURE CAPITAL TRUST (AMENDMENT) REGULATIONS 2014

2014 No. 1929

1. This explanatory memorandum has been prepared by HM Revenue and Customs (“HMRC”) and is laid before the House of Commons by Command of Her Majesty.

2. Purpose of the instrument

The instrument amends the Venture Capital Trust Regulations 1995 (SI 1995/1979) (the “Principal Regulations”) to ensure that where shares in a venture capital trust (a “VCT”) are subscribed for by a nominee, HMRC is able to identify the beneficial owner and require the VCT, the nominee and the beneficial owner to provide information to, and make records available for inspection by, HMRC.

3. Matters of special interest to the Select Committee on Statutory Instruments

None.

4. Legislative Context

4.1 The instrument supplements a change made by Finance Act 2014 to the primary VCT legislation in Part 6 of the Income Tax Act 2007. That change allows individual investors to subscribe for VCT shares via a nominee. Previously, investors had to subscribe directly, although having done so they were then permitted to transfer their shares to a nominee.

4.2 The Principal Regulations already require VCTs to make returns to HMRC of investors who have subscribed for shares (allowing HMRC to ensure that the tax relief available on subscription for shares in a VCT is being given to those who are eligible to receive it). The amendments to the Principal Regulations ensure that where shares in a VCT are issued to a nominee for an investor, HMRC is able to identify the beneficial owner of those shares. The amendments also ensure that the VCT, the nominee and the beneficial owner may be required to provide information to, and make records available for inspection by, HMRC.

5. Territorial Extent and Application

This instrument applies to all of the United Kingdom.

6. European Convention on Human Rights

As the instrument is subject to negative resolution procedure and does not amend primary legislation, no statement is required.

7. Policy background

7.1 The VCT regime exists to improve access to finance for small and growing companies by providing a range of income and capital gains tax reliefs for individuals who invest in a VCT. The VCT is then required to invest the monies in the small and growing companies which are the target of the policy, subject to certain requirements as to the nature and timing of those investments.

7.2 The change in Finance Act 2014 which allows individuals to invest via nominees is intended to increase the attractiveness of VCT investment as an asset class by providing flexibility for individual investors as to how they make and manage their investments.

8. Consultation outcome

A representative sample of VCT managers and their advisors have been consulted informally, and they have confirmed that the change brought about by this instrument is unlikely to give rise to any administrative or implementation problems for VCTs.

9. Guidance

HMRC will publish guidance material on the effect of the new legislation in line with its existing practices for all tax legislation.

10. Impact

A Tax Information and Impact Note covering this instrument was published on 10 December 2013 alongside draft legislation for Finance Bill 2014 and is available on the HMRC website at https://www.gov.uk/government/collections/tax-information-and- impact-notes-tiins. It remains an accurate summary of the impacts that apply to this instrument.

11. Regulating small business

11.1 The legislation applies to small businesses.

11.2 A minority of VCTs are small businesses. The legislation applies to them as it applies to other VCTs. It is not anticipated that the change will affect those VCTs which are small businesses in a way which could be considered disproportionate.

12. Monitoring & review

HMRC will monitor the effect of the legislation as part of its overall monitoring of the VCT regime as a whole.

13. Contact

Kathryn Robertson at HM Revenue and Customs (tel: 03000 585729; or email: kathryn.robertson@hmrc.gsi.gov.uk) can answer any queries regarding the instrument.