How to claim VCT tax relief

What is needed in order to claim income tax relief on a VCT investment?

Once your clients have invested in a VCT, they can claim income tax relief of up to 20% on the amount they’ve invested.

Income tax relief can be used to reduce or offset an income tax liability investors have for the tax year in which VCT shares are allotted.

After shares are allotted, investors will be issued with a VCT tax certificate and a VCT share certificate. They’ll need the tax certificate to make a claim for income tax relief.  

How does claiming income tax relief for a VCT investment work?

There are two ways investors can claim VCT tax relief, depending on individual circumstances.

Claiming VCT tax relief in an online self-assessment

If your client completes a self assessment tax return, they can claim their income tax relief through their online HMRC account.  

To do this, they’ll need to:  

• Log in to their HMRC self assessment account.
• In their return, select ‘Tailor your return’ and tick ‘Other tax reliefs’.
• Continue to ‘Other tax reliefs and deductions’.
• Find ‘Subscriptions for Venture Capital Trust shares’ and enter the amount they invested, as shown on their tax certificate.

They do not need to enter the 20% tax relief amount – HMRC will calculate this automatically.  

Any tax relief claimed through self assessment will reduce the amount of income tax your client will need to pay. If this means they have already paid too much income tax, HMRC will repay the excess by cheque or pay it directly into their bank account. 

Reducing their monthly tax bill through PAYE 

If your client invested towards the start of the tax year, they can call or write to HMRC asking them to adjust their tax code.  

This means the amount of income tax they pay will be reduced on a month-by-month basis until their income tax relief is used up. They’ll need to include their national insurance number, a P60 form if they have one and a photocopy of their VCT tax certificate. 

They can send the letter to:  

HM Revenue and Customs 
Pay As You Earn and Self Assessment 
HM Revenue and Customs 

For more information on claiming income tax relief for a VCT, your client can contact HMRC directly on 0300 200 3300. 

How will your client receive the tax relief?

Investors can receive income tax relief in a few ways, depending on how and when tax was paid. If tax has not yet been paid for the year, it simply lowers the investor’s upcoming bill. If tax has already been paid, HMRC may issue a refund by bank transfer or cheque, depending on the investor’s preferences and payment history.

Some things to bear in mind

• Investors cannot claim more income tax relief than the amount of income tax they owe in any tax year.
• Investors can only claim tax relief on the first £200,000 they invest in any single tax year.
• If investors dispose of VCT shares within five years of the date of issue, they will have to let HMRC know and repay any upfront tax relief claimed.