Money News
Budget 2007 includes proposals to adjust the Venture Capital Trust (VCT) rules to support the ongoing development of the sector and ensure that VCTs can sell their successful investments without risking their tax-efficient status.
Without the change there was a risk that a VCT selling an investment would have received cash which caused its overall exposure to investments in small companies to fall below the level required to maintain its VCT status and its resulting tax advantages. This would have, in effect, punished companies for making successful investments in small businesses - which is the government's objective.
The change will not only enable VCTs to realise profitable investments, but will also enable them to reinvest the proceeds back into small businesses, where attractive opportunities can be identified.
This key change is accompanied by a number of other measures which will have technical implications for the sector. These include introducing regulations to formalise the circumstances under which HM Revenue and Customs will be able to maintain VCT approval where there are unavoidable breaches of their qualifying conditions, and other technical measures applying to newly launched VCTs to ensure they remain in line with new State Aid guidelines published by the European Commission.
22 March 2007 © Moneyextra.com
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