HMRC has set aside a decision to withdraw a venture capital trust (VCT) status from Oxford Technology VCT plc (OT1) and Oxford Technology 3 VCT plc (OT3), following an earlier determination on 7 March 2014 to withdraw capital trust approval, putting at risk £300,000 in VCT tax relief, following successful legal challenge put forward by Graham Aaronson QC
The removal of the VCT status, against which the technology investment company lodged an appeal on 26 March, put up to £298,500 in income tax relief at risk, which was claimed on a top-up fundraising of £995,000 for the OT3 between 2007 and 2010.
HMRC’s latest decision comes after a series of meetings and writing exchanges between Oxford Technology’s legal representatives and the tax department, and includes HMRC’s consideration of a legal opinion given on behalf of the Oxford VCTs by Graham Aaronson QC and Jonathan Bremner of Counsel.
HMRC will now consider afresh whether it will be appropriate to withdraw VCT status from OT1 and OT3, and to assist their consideration of this matter they have invited Joseph Hage Aaronson LLP to make additional representations relating to the issue.
In a statement agreed with HMRC, Oxford Technology said: ‘The effect of this is that the VCT status of OT1 and OT3 is, at the moment, to be treated as not having been withdrawn so that shareholders need not take any steps in relation to this matter.
‘If, in the light of the further representations HMRC decide that VCT approval should not be withdrawn then that will conclude the matter so far as the shareholders' tax position is concerned.’
However if, on the other hand, HMRC decide that such approval should be withdrawn, then shareholders will be notified accordingly and will need to consider what steps they should take.
Should the company’s VCT status be removed, its investments would no longer benefit from 30% upfront tax relief. In addition, gains will also lose exemption from capital gains tax.
HMRC has said that it would also reclaim ‘front-end’ tax relief paid out within the past five years, the minimum holding period to qualify for the relief.
Managing director of Oxford Technology, Lucius Cary, said he hoped to avoid a further appeal.
‘I hope this matter can be resolved quickly and amicably’ he said.