The Venture Capital Trust (Winding up and Mergers) (Tax) Regulations 2004

JurisdictionUK Non-devolved

2004 No. 2199

INCOME TAX

TAXES

The Venture Capital Trust (Winding up and Mergers) (Tax) Regulations 2004

Made 27th August 2004

Laid before the House of Commons 27th August 2004

Coming into force 17th September 2004

The Treasury, in exercise of the powers conferred upon them by paragraphs 2 to 5, 7 to 9, 11 and 16 of Schedule 33 to the Finance Act 20021, hereby make the following Regulations:

Citation, commencement and effect
S-1 Citation, commencement and effect

Citation, commencement and effect

1.—(1) These Regulations may be cited as the Venture Capital Trust (Winding up and Mergers) (Tax) Regulations 2004 and shall come into force on 17th September 2004.

(2) These Regulations have effect as follows –

(a)

(a) regulations 3 to 8 have effect in relation to any VCT-in-liquidation whose winding-up commences on or after 17th April 2002;

(b)

(b) regulations 9 to 13 have effect in relation to any merger where the transactions for effecting the merger take place on or after 17th April 2002; and

(c)

(c) regulation 14 has effect in relation to shares issued on or after 6th April 2004.

Interpretation
S-2 Interpretation

Interpretation

2.—(1) In these Regulations unless the context otherwise requires–

“the Board” means the Commissioners of Inland Revenue;

“eligible shares” has the meaning in Part 1 of Schedule 15B2;

“the 15% test” means the condition specified in section 842AA(2)(d)3;

“market value” shall be construed in accordance with sections 272 and 273 of the 1992 Act;

“merger” of two or more companies (and the associated definitions of “the merging companies” and “the successor company”) shall bear the appropriate meanings given by paragraph 10 of Schedule 33;

“the 1992 Act” means the Taxation of Chargeable Gains Act 19924;

“prescribed winding-up period”, in relation to a VCT-in-liquidation, means the period –

(a) beginning on the commencement of the company’s winding up, and

(b) ending on the earliest of –

(i) the end of the company’s winding up,

(ii) the company ceasing to be wound up,

(iii) the dissolution of the company, and

(iv) the third anniversary of the commencement of the winding up;

“qualifying holdings” has the meaning in Schedule 28B5;

Schedule 33” means Schedule 33 to the Finance Act 2002;

“securities”, except in regulation 12, has the same meaning as in section 842AA(12);

“the 70% test” means the condition specified in section 842AA(2)(b);

“the 30% test” means the condition specified in section 842AA(2)(c);

“statement of affairs” means a statement as to the affairs of a company, in the form prescribed under and complying with section 99 or 131 of the Insolvency Act 19866, as the case may be;

“the Taxes Act” means the Income and Corporation Taxes Act 19887;

“VCT approval” has the meaning given by paragraph 7(4) of Schedule 33, and any reference to such approval taking effect shall have the same meaning as in section 842AA;

“VCT-in-liquidation” has the meaning given by paragraph 1(1) of Schedule 33;

“venture capital trust” has the meaning given by section 842AA(1).

(2) In regulations 9 to 14 and this paragraph—

a “paragraph 10(1) merger” means a merger described in paragraph 10(1) of Schedule 33;

a “paragraph 10(2) merger” means a merger described in paragraph 10(2) of Schedule 33;

“share for business transfer” means an issue of shares as mentioned in paragraph 10(1)(b) or (2)(b) of Schedule 33 (in each case, omitting sub-paragraph (i) and the word “or” which follows it);

“share for share exchange” means an exchange of shares for shares as mentioned in paragraph 10(1)(b) or (2)(b) of Schedule 33 (in each case, omitting sub-paragraph (ii) and the word “or” which follows sub-paragraph (i));

“shares issued to effect the merger”—

(a) in the case of a paragraph 10(1) merger, means shares in the successor company issued as mentioned in paragraph 10(1)(b) of Schedule 33, and

(b) in the case of a paragraph 10(2) merger, means shares in the successor company issued as mentioned in paragraph 10(2)(b) of Schedule 33;

“shares issued for new consideration” means shares in the successor company, issued in the period during which the merger takes place, for a consideration other than as mentioned in paragraph 10(1)(b) or (2)(b) of Schedule 33.

(3) References in these Regulations to a section or Schedule (excepting Schedule 33), without more, are to that section of or Schedule to the Taxes Act.

(4) Paragraph 7(5) of Schedule 33 (acts of a liquidator attributed to the company) shall apply for the purposes of regulations 3 to 8 as it applies to Part 1 of Schedule 33.

(5) References to a resolution passed, or petition presented, to wind up a company (or other references to insolvency procedure) shall, where the winding up is wholly or partly other than under the law of England and Wales, include references to the corresponding local equivalents.

Winding up of Venture Capital Trusts

Winding up of Venture Capital Trusts

S-3 Regulations 4 to 8 apply, subject to paragraphs (2) and (3), in...

3.—(1) Regulations 4 to 8 apply, subject to paragraphs (2) and (3), in the case of a VCT-in-liquidation –

(a)

(a) whose VCT approval has had effect for the continuous period of 3 years immediately preceding the commencement of its winding up, or

(b)

(b) which is being wound up by the court under section 122(1) of the Insolvency Act 1986 (other than under paragraph (a) of that provision) or under any corresponding local equivalent,

and which has given notice to the Board that a resolution has been passed, or a petition presented, to wind up the company, pursuant to regulation 8(1) of the Venture Capital Trust Regulations 19958.

(2) Where a company—

(a)

(a) on or after 6th April 2004 and before 6th April 2006, makes an issue of shares falling within the circumstances in section 842AA(5A)(a) and (b)9(that is, whether or not the company makes a further issue as mentioned in paragraph (c) of that provision), and

(b)

(b) has not made an issue of shares falling within those circumstances, before 6th April 2004,

the period in paragraph (1)(a) shall be 5 years.

(3) Paragraph (1) shall not apply to any VCT-in-liquidation which is, or has at any time been, a merging company (other than a successor company).

S-4 For the purposes of paragraph 3(9) of Schedule 15B, the...

4. For the purposes of paragraph 3(9) of Schedule 15B, the commencement of the winding up shall not affect the status of the VCT-in-liquidation as a venture capital trust.

S-5 Section 100(1) of the 1992 Act (read with section 16(2) of...

5. Section 100(1) of the 1992 Act10(read with section 16(2) of that Act as regards losses) shall have effect as if a VCT-in-liquidation that would not otherwise be a venture capital trust were treated as a venture capital trust, during its prescribed winding-up period, in relation to gains and losses accruing on the disposal of assets acquired by the trust company before the commencement of its winding up.

S-6 Sections 151A (excepting subsection (3)) and 151B of the ...

6.—(1) Sections 151A11(excepting subsection (3)) and 151B11of the 1992 Act shall have effect as follows.

(2) During the VCT-in-liquidation’s prescribed winding-up period those provisions shall have effect as if–

(a)

(a) the conditions in section 842AA(2) were fulfilled, and

(b)

(b) the VCT-in-liquidation, if not otherwise a venture capital trust, were so treated.

(3) At the end of the prescribed winding-up period, if–

(a)

(a) the VCT-in-liquidation is still in existence, and

(b)

(b) the conditions in section 842AA(2) are not fulfilled immediately following the end of that period,

VCT approval shall be treated, for the purposes of sections 151A(1) and 151B(6) and (7), as having been withdrawn from the VCT-in-liquidation immediately following the end of that period.

S-7 Paragraph 3(1) of Schedule 5C to the 1992 Act (“paragraph...

7.—(1) Paragraph 3(1) of Schedule 5C to the 1992 Act12(“paragraph 3(1)”) shall have effect as if—

(a)

(a) the VCT-in-liquidation, if not otherwise a venture capital trust, were so treated during its prescribed winding-up period;

(b)

(b) during its prescribed winding-up period, paragraph (f) of paragraph 3(1) were omitted;

(c)

(c) in paragraph (g) of paragraph 3(1), for “(f)” there were substituted “(e)”; and

(d)

(d) there were added at the end of paragraph 3(1)—

“or

(h)

(h) a VCT-in-liquidation—

(i) to which regulation 7 of the Venture Capital Trust (Winding up and Mergers) (Tax) Regulations 2004 applies, and

(ii) in which those shares are shares,

is still in existence immediately following the end of its prescribed winding-up period (within the meaning in those Regulations).”.

(2) Paragraph 3(6) of that Schedule shall be modified as if for “(f)” there were substituted “(h)”.

(3) Paragraph 5(1) of that Schedule shall be modified as if for paragraph (d) there were substituted—

“(d)

“(d) to the person who holds the shares in question immediately following the end of the company’s prescribed winding-up period (within the meaning in the Venture Capital Trust (Winding up and Mergers) (Tax) Regulations 2004),”.

Transfer of investments in specie from a VCT-in-liquidation to a venture capital trust
S-8 Transfer of investments in specie from a VCT-in-liquidation to a venture capital trust

Transfer of investments in specie from a VCT-in-liquidation to a venture capital trust

8.—(1) This regulation applies where –

(a)

(a) a VCT-in-liquidation has made all reasonable endeavours to sell shares or securities comprised in its qualifying holdings at, or as near as may be to, their market value, but has been unable to do so;

(b)

(b) the VCT-in-liquidation, during its prescribed winding-up period, transfers the shares or securities to a venture capital trust by way of a bargain made at arm’s length, or for a consideration not less than their market value; and

(c)

(c) the value of all shares or securities transferred under this regulation by the VCT-in-liquidation to venture capital trusts during its prescribed winding-up period does not exceed 7.5% of the...

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