VCTs – annual returns of investments

It was today announced at a meeting held at the AIC, that HMRC are proposing a number of changes to the annual ‘regulation 22’ return required for VCTs.

The following changes are proposed:

1. Increasing the record keeping requirement for a VCT from 6 to 10 years to align with EU regulations
2. Requesting new information about VCT investee companies during the relevant period (as a result of State aid modernisation and transparency obligations, to assist with an independent evaluation of schemes in 2018/19 and to give them a better understanding of VCT activities)

In terms of (2) above, it is proposed that the additional information below will be required for investments made by VCTs during accounting periods ending on or after 30 November 2016 – and the additional information is required for the whole accounting period. For example, a VCT with an accounting period ending 31 December 2016 will be required to supply the following for the period 1^st January 2016 to 31^st December 2016:

• The nature of trade for the investee company (this is likely to be a short description/narrative, similar to what would appear on an EIS1 form);
• The number of full-time equivalent employees at the date of investment;
• The gross assets of the investee company at the date of investment;
• The age of the investee company (and date of its first commercial sale if different);
• For companies older than 7 years old, whether conditions A, B or C of the maximum permitted age requirements applies, or whether it is a Knowledge-intensive company;
• Whether HMRC has provided an advance assurance application for the investment;
• Whether an investment was made out of ‘protected monies’ and, if so, which ‘pot’.

In addition, it is proposed that HMRC will require certain information regarding the total proceeds for disposals made during the period along with the amount of ‘protected money’ held at the beginning and end of the accounting period for each ‘pot’.

A new mandatory (electronic) format for supplying the above information is being developed and this is expected to be ready during 2017.