Section 12J Tax Overview
Upfront tax relief
A Section 12J Investor receives a tax deduction equal to 100% of the amount invested. This tax deduction is available immediately. There is no annual limit or lifetime limit. The relief is available provided that the investor subscribes for equity shares, as opposed to buying them second hand from other investors.
The upfront income tax relief described above is only temporary. The tax deduction will become permanent if the VCC shares are held for a period of 5 years.
Dividends on VCC shares are still subject to the 15% dividends tax. An investor may however qualify for a dividend tax exemption as per the usual Dividends Tax Legislation.
Capital gains tax
Capital Gains Tax (CGT) will be payable when selling VCC shares. The CGT rate will be at the tax payers usual CGT rate. There is tax relief for capital losses on disposal of VCC shares. Any losses can be deducted against any other capital gains. It will not be possible to set off capital losses against the investors’ income.
An investor will not be allowed to defer the gain from another investment by applying the sale proceeds to subscribe for VCC shares.
The venture capital scheme is temporary
The Section 12J legislation dictates that VCC investments will be subject to a sunset period which ends on 30 June 2021. This means that upfront income tax relief will only apply to VCC shares acquired on or before 30 June 2021.