HMRC buy-back changes will not dampen VCT liquidity

Guy Myles, co-founder and managing director of Octopus, has revealed he is in talks with HM Revenue & Customs about changes to enhanced buyback rules for VCTs and he expects that any changes to prevent so-called ‘enhanced buy-backs’ will not hit liquidity.

In a video interview with FTAdviser’s Emma Ann Hughes, Mr Myles said his talks with HMRC revealed rules permitting the traditional buyback facility for VCTs are unlikely to be changed.

He said enhanced buyback rules will be tinkered with by the government, but he insisted changes should not be negative for VCT holders.

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Earlier this summer, firms and trade bodies across the sector offered a cautious welcome to a government consultation on so-called ‘enhanced buy-backs’, voicing fears that if not carefully handled a clamp down could hit liquidity available to investors from managers buying back shares.

Enhanced buy-backs allow investors who have their VCT shares for more than the five-year qualifying period to sell their shares back to the manager and immediately repurchase shares for another five years, thereby becoming entitled to another round of 30 percent income tax relief.

Mr Myles said: “There is a consultation at the moment around a very specific, technical area of enhanced buybacks.

“As part of that consultation, it is quite clear that the traditional buy-backs that people rely on to provide them with an exit from VCTs, which are very important, they are not under scope for that review in any way.

“We, as market share leaders in the VCT space, make it our business to be quite close to HMRC and HM Treasury to know what people are thinking.

“I can say, with certainty, that there is complete support for traditional buy-backs within VCTs but there is a review around a particular, technical area and we are participating in that.

“I don’t think any outcome from that will be negative for holders of VCTs. It may just change some of the features that you have been able to take advantage of in the past.”

Click here to watch FTAdviser’s interview with Mr Myles.