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VCT Tax Relief Question

Sophisticated and complex high-risk tax-sensitive investments in small companies: handle with care
Gostevie
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VCT Tax Relief Question

#228980

Postby Gostevie » June 12th, 2019, 4:06 pm

Although I have been investing in VCTs for many years I have in the past always bought them in the second-hand market. This year for the first time I bought new shares in the latest Albion fundraise and have a question about the upfront tax relief.

I subscribed to the 2018/19 allotment, and when I received the tax certificates at the end of April I sent them to HMRC with a P60 for that tax year and a covering letter requesting the tax relief by cheque or bank transfer as I am a basic rate tax payer, paid via PAYE, and don’t usually fill out a tax return. I followed these instructions from Wealth Club:

https://www.wealthclub.co.uk/venture-ca ... ax-relief/

“If you don’t habitually file a tax return, for instance, if all of your tax is paid at source through PAYE, there is an alternative way to claim VCT tax relief.

You can send your VCT tax certificate, along with a copy of your P60 (if you have one), to your local tax office.

You should then either receive tax relief by way of a PAYE code change, or a tax refund.”


I haven’t heard anything back yet and was wondering if I should chase it up, or if it is normal for it to take a long time. Or should I have done things differently? (I sent the documents to HMRC's BX9 1AS address, which I gather has superseded local tax offices.)

Any thoughts would be much appreciated.

Many thanks,

Gostevie

runnygum
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Re: VCT Tax Relief Question

#228990

Postby runnygum » June 12th, 2019, 4:33 pm

Hopefully you took a copy of the tax certificate from the VCT.
Did you confirm that process via HMRC rather than just going by what the provider said?

I have always done it via tax return, but thats not a cheap option if you dont need to submit a return.

This does seem to suggest you can request a refund https://www.gov.uk/guidance/venture-cap ... aim-relief

Maybe a phone call to them will not to go waste :)

scotia
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Re: VCT Tax Relief Question

#228991

Postby scotia » June 12th, 2019, 4:38 pm

In the past if my wife has purchased a VCT early in the taxable year she has simply sent a copy of the certificate to the Inland Revenue, and has had her tax code altered appropriately - usually without any significant wait. In the past two years she has purchased VCTs near the end of the taxable year, so has waited until its end, then filed a tax return on-line (which she is not obliged to do). I also file my tax return on-line, and the tax relief payment is in our bank accounts in around a week. Given the changeover of no longer taxing savings interest and dividends at source, and also adding the complication of the multiple Scottish rates of tax, I think its almost certain that we both need to file a tax return, whether required or not, if we want any accuracy in the amount of tax we pay.
(Edit - there has been another response since I prepared this one. I'm a bit confused by a statement as to the cost of submitting a return. I carry it out on-line using the Inland Revenue provided tools, and there is no charge.)

UncleEbenezer
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Re: VCT Tax Relief Question

#229003

Postby UncleEbenezer » June 12th, 2019, 5:15 pm

I would suggest you start submitting a tax return to them (online). It really is painless, and it resolves all those rebates.

A few years back they told me I no longer needed to submit a tax return (I don't remember why - probably it was when I was in PAYE employment for a while and my own company was earning £0). I ignored them, submitted my tax return, and duly got my rebate for the year in question, and have done ever since.

Last year I didn't bother at all until they reminded me. No VCT subscriptions, and the rebate was only a few quid that could have gone under-the-radar.

scotia
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Re: VCT Tax Relief Question

#229014

Postby scotia » June 12th, 2019, 5:55 pm

UncleEbenezer wrote:I would suggest you start submitting a tax return to them (online). It really is painless, and it resolves all those rebates.

Agreed!

Gostevie
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Re: VCT Tax Relief Question

#229045

Postby Gostevie » June 12th, 2019, 9:17 pm

Many thanks for such quick replies. This really is a great board for VCT investors.
runnygum wrote:Hopefully you took a copy of the tax certificate from the VCT.

Did you confirm that process via HMRC rather than just going by what the provider said?


Yes, I took copies of the tax certificates - I invested across all six of the Albion VCTs so I have six of them. I didn't contact HMRC but went by what Wealth Club and others seem to advise. (For the record I bought direct, not through Wealth Club.)

UncleEbenezer wrote:I would suggest you start submitting a tax return to them (online). It really is painless, and it resolves all those rebates.


Thanks! I've filled out a couple of online tax returns in the past when I earned a half-decent salary. On one occasion I was told I owed them the grand sum of £1.80 arrears, or else. I was tempted to ask them if I could pay by instalments but on balance decided that playing the Smart Alec with HMRC wouldn't be such a great idea. :lol:

scotia wrote:In the past if my wife has purchased a VCT early in the taxable year she has simply sent a copy of the certificate to the Inland Revenue, and has had her tax code altered appropriately - usually without any significant wait.


Thank you, that's interesting. I think on balance I'll do nothing until the end of the month, and if by then I haven't had any contact from HMRC or my tax code on my June payslip hasn't been adjusted I'll give them a call.

Gostevie

scotia
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Re: VCT Tax Relief Question

#229085

Postby scotia » June 13th, 2019, 1:54 am

Just a few additions:-
I seem to recollect that the first time my wife wrote to the Inland Revenue concerning a VCT purchase, they requested to see the certificate - and she sent a photocopy. Thereafter she included a copy of the certificate with the letter. But when she changed to making an online tax return (without a copy of the certificate) she has never been asked to provide the certificate. In many years of myself making online returns I cannot recall ever being asked to provide certificated evidence of the VCT purchase.
I wonder if the VCT provides the Inland Revenue with information on the VCT purchases, possibly at the end of each tax year. Or does the Inland Revenue simply allow the relief on trust?

UncleEbenezer
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Re: VCT Tax Relief Question

#229095

Postby UncleEbenezer » June 13th, 2019, 6:43 am

scotia wrote:I wonder if the VCT provides the Inland Revenue with information on the VCT purchases, possibly at the end of each tax year. Or does the Inland Revenue simply allow the relief on trust?

I kind-of thought that's why you have to supply an NI number when you buy new VCT shares. And probably also the historic difficulty with nominee accounts.
Given the complexity of rules over when you can sell, there must be lots of scope there for mistakes - innocent or otherwise - there. Safer to assume the shareholder register feeds in to HMRC's checks.

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Re: VCT Tax Relief Question

#229152

Postby Kidman » June 13th, 2019, 10:16 am

scotia wrote:I wonder if the VCT provides the Inland Revenue with information on the VCT purchases, possibly at the end of each tax year. Or does the Inland Revenue simply allow the relief on trust?
VCTs must make a return for each tax year (a year beginning on 6 April and ending on 5 April in the following year) containing particulars of amounts subscribed by investors for ‘eligible shares’ in the year. (SI1995/1979 Regulation 21A).
For further information see the HMRC Manual:- https://www.gov.uk/hmrc-internal-manuals/venture-capital-schemes-manual/vcm58090

Gostevie
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Re: VCT Tax Relief Question

#230866

Postby Gostevie » June 19th, 2019, 8:57 pm

I phoned HMRC this morning regarding my VCT Income Tax relief query and after about 15 minutes got through to a pleasant young lady who was very helpful. She confirmed that my Tax Certificates had been received, that all was in order, and that they calculated they owed me £x,xxx in tax relief (which I agreed with), but it was on hold as there was a query as to how much bank interest I received during the year. Their estimate was £3.18 and would I confirm that please?

I confirmed that I did indeed receive £3.18 in bank interest in 2018/19 - no idea if I actually did or not, but heigh ho! - and she said she could now sign that off and that I should receive a letter in 2 - 3 weeks confirming what was owed to me and I could then tell them how I would like to receive it - cheque or Tax Code adjustment.

I have no idea what bearing any bank interest I received last year should have on a VCT Tax Relief claim, or how long it would have remained 'on hold' if I hadn't have phoned them, but at least it is moving forward. HMRC moves in mysterious ways but we always get there in the end.

Gostevie

scotia
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Re: VCT Tax Relief Question

#230886

Postby scotia » June 19th, 2019, 11:49 pm

Gostevie wrote:I have no idea what bearing any bank interest I received last year should have on a VCT Tax Relief claim, or how long it would have remained 'on hold' if I hadn't have phoned them, but at least it is moving forward. HMRC moves in mysterious ways but we always get there in the end.

Interest is now normally paid gross, without tax deduction at source. You have an interest allowance - below which you do not pay tax on your interest. For a standard tax payer this is £1000, for a higher rate tax payer this is £500, and if you are on the top rate of tax, this is zero. To work out how much tax you require to pay, the HMRC needs to know the interest you have received. So the young lady was not only handling your VCT tax relief, she was checking that all other potentially taxable income had been correctly assessed. Since HMRC are reputedly short staffed, they probably needed prodding to tidy up your tax affairs. However their online service would seem to be handled by an efficient computer, and, certainly in my case, the tax rebate was received in my bank account within a few days of filing my online return. Presumably their computer never takes time off. :D

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Re: VCT Tax Relief Question

#230942

Postby BusyBumbleBee » June 20th, 2019, 10:51 am

Gostevie wrote:HMRC ... owed me £x,xxx in tax relief

and there was me thinking it would be £xx,xxx ;)

with kind regards - John

Gostevie
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Re: VCT Tax Relief Question

#233941

Postby Gostevie » July 4th, 2019, 1:27 pm

To finish the story, the £x,xxx tax relief credit hit my bank account this morning. :D Looking forward to the AAEV and AAVC AGMs, both of which I hope to attend at the new venue. Hope to see some fellow Lemon Fools there.

Gostevie


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