CGT and Vcts

Ainsley1 wrote: »

or is it treated as a disposal with the gain for cgt purposes based based upon {the amount of that sale} and thus potentially or partially exempt if under the allowance for that year. Assumption no other capital disposals in that sale year.

It's as you suggest in the bit I've highlighted - except the gain is the amount of the original VCT investment that you used to claim relief, not the amount you get when you sell VCT shares. The key point is that tax on that amount is recalculated according to your tax position this year, and so it's not necessarily the same tax that would have been due in the year you bought the VCT.

This time-shifting property is the main advantage of deferral relief. You get to shift a gain from a year in which you would have paid full CGT on it, to a year when you'll pay either a lower rate (because your income is lower) or indeed no tax at all (because your annual CGT allowance absorbs it).

enator wrote: »

VCTs are not liable for CGT as long as they are kept for five years

There is indeed no CGT on any gain made on the VCT. (Nor can you use any loss to offset your taxable gains.) If you hold a VCT for less than five years, there is still no CGT, but you have to pay back the income tax relief you got on purchase.

But what the OP is asking about is for VCTs bought before April 2004, when you could claim Reinvestment Relief (aka Deferral Relief).

Say you invested £5k in a VCT in 2003-04. You were allowed, if you chose, to deduct £5k from your taxable capital gains in that year. The price of doing that is that when you sell the VCT (let's say 2018-19), that £5k needs to be added back to your 2018-19 capital gains. Note that the proceeds of selling the VCT are irrelevant - your "revived gain" is the original £5k, whether your sale proceeds from the VCT are £1k, £5k or £50k.

While that relief doesn't apply to VCTs purchased after April 2004, it still exists for new EIS investments. (Not SEIS investments, which do give you CGT relief, but in a different way.)

Ainsley1 wrote: »

The shares were indeed purchases prior to the date when deferral relief ended....just a few years ago:) :eek: doesn't time fly!

Don't worry, we don't look a day older than we did in 2004