HMRC error leaves VCTs unable to issue shares

Venture Capital Trusts have been hoarding investor cash after an error from HM Revenue and Customs left the vehicles afraid of issuing new shares.

New legislation introduced by the Treasury was intended to prevent VCTs from abusing their tax-efficient status by paying out dividends to investors buying in to a VCT for a very short period of time purely to collect the tax-free dividend. However, wording in this year's Finance Bill mistakenly implies trusts paying dividends to any shareholders purchasing new shares after 6 April would lose their tax-efficient status. Some VCTs are understood to have held off issuing new shares after 6 April as a result, with fears compounded by HMRC's decision last month to revoke the tax-efficient...