Do pubs face ‘VCT’
tax relief threat?
24
| Hospitality Today | Aug/Sept 2016
by Susanna Gilmartin and Rahanna Choudhury
The Finance Act 2015 introduced new
rules preventing Venture Capital Trust
(VCT) investment to acquire businesses,
which has caused considerable
speculation that pubs in particular
will be hit hardest. Why and how?
What are the new rules?
What is a VCT?
However, investment in businesses is still
permitted in the following circumstances:
VCTs are investment vehicles which
provide private equity capital for small
businesses to help them grow. The
advantages for those investing in a VCT is
up to 30% income tax relief each tax year
on investments up to £200,000 provided
VCT shares are kept for at least five years,
tax free dividends and no capital gains tax.
Why are pubs in particular
under threat?
Many pubs have turned to investment
from VCTs in order to stay afloat and
combat ever growing competition from
supermarkets selling cheap alcohol.
In summary, the rule that has caused the
greatest concern is the prevention of VCT
investment to acquire a business. This
covers third party acquisitions and also
management buy-outs.
companies raising an investment
where the amount of the investment
is at least 50% of the company’s
annual turnover; and
new businesses and businesses that
are owned by another company
provided they receive their first
investment from a VCT within
seven years of the date of their first
commercial sale.
A first commercial sale would be, for
example, when a pub first opened its
doors to customers and sold its first pint.