Reinvested VCT dividends

[Deweyman777]

Hello all,

I hope there is a relatively quick answer to this one!

I have a number of VCT’s that pay dividends, which I always reinvest. Can I claim the 30% VCT tax relief for these reinvested dividends on my tax return?

Many thanks for any advice.

DM777

[Spet0789]

Hello all,

I hope there is a relatively quick answer to this one!

I have a number of VCT’s that pay dividends, which I always reinvest. Can I claim the 30% VCT tax relief for these reinvested dividends on my tax return?

Many thanks for any advice.

DM777

Yes, up to the £200k total limit and provided you have paid enough income tax.

[Deweyman777]

Many thanks. Just what I wanted to hear. Would you happen to know if I can claim for VCT dividends reinvested from previous tax years? Specifically it would be tax year 19/20

[scotia]

Hello all,

I hope there is a relatively quick answer to this one!

I have a number of VCT’s that pay dividends, which I always reinvest. Can I claim the 30% VCT tax relief for these reinvested dividends on my tax return?

Many thanks for any advice.

DM777

The 30% tax relief depends on how the dividends were re-invested. If they were in a Dividend Reinvestment Scheme (DRIS) which issued new shares in the VCT, then the answer is yes. If, on the other hand, the dividends were used to buy existing shares on the market, then the answer is no. Most VCTs which operate a DRIS issue new shares - with a tax certificate. I seem to remember that some years ago Baronsmead was the odd man out - and operated a DRIP scheme which purchased the shares on the market - so no 30% tax relief. It appears from their web site that this is still active:-

Each of the Baronsmead VCTs operates a Dividend Reinvestment Plan (DRIP), providing their respective shareholders with the opportunity to reinvest their cash dividends paid by purchasing existing shares in the respective Baronsmead VCT.
As these are NOT new shares issued by the respective Baronsmead VCT, participants will not be able to claim upfront income tax relief in respect of shares bought pursuant to a DRIP. They will, however, qualify for VCT dividend and capital gains tax reliefs available as VCT shares.

[Spet0789]

Many thanks. Just what I wanted to hear. Would you happen to know if I can claim for VCT dividends reinvested from previous tax years? Specifically it would be tax year 19/20

For VCTs, you can claim relief up to 4 years after the end of tax year of assessment in which you made the investment.

Thanks to Scotia for the clarification that relief can only be claimed where dividends are reinvested to subscribe for newly created VCT shares.

[ukfire]

What strategy is best used for DRIS if you plan on selling after 5 years? If you sold your initial shares in a VCT, you'd end up with a rump of approx 25% left, which may not be that economical to sell. But I suppose it doesn't matter if you, say, planned to buy back in to the same VCT in the future.

[ukfire]

I've now posted above question in VCT board, sorry.