PAYE10075 - Coding: coding allowances and reliefs: venture capital trust
The Venture Capital Trust (VCT) scheme took effect from 6 April 1995. Guidance in the Venture Capital Schemes Manual (VCM) at VCM50000 onwards describes the scheme and tells you how to deal with claims to income tax relief on subscriptions for VCT shares.
Rate of relief
Relief is given in terms of tax for the year of assessment in which the shares are issued by the VCT. VCM51030 gives instructions on how relief is calculated and the limit of the relief.
Note: Where Scottish or Welsh income tax applies, NPS will use the appropriate rate to calculate the relief based on the individual’s highest rate of liability.
Interaction with other reliefs
VCM51030 sets out the order in which relief should be given. You will need to take this into account when deciding in what order to calculate various coding allowances and reliefs.
Coding descriptor to use
There are no plans to introduce a coding deduction to claw back excess relief. Instead, the coding allowance should be given in such a figure as will give the correct amount of relief (see also VCM51070). Use the description Concessional Relief. Further information can be found at PAYE130025.
Issue of P2
The Concessional relief note printed on the P2 will say 'This is tax relief for things like a gift of shares to charity or other qualifying investment'.
How to calculate coding allowance for VCT
Calculate the relief due in terms of tax and convert this to a coding allowance. The factor you use to do this will depend on the estimated highest rate at the coded source.
Where the estimated liability at the basic rate, higher rate, or the additional rate clearly exceeds the amount of relief due, multiply the relief due in terms of tax by 100, divided by the individual's highest rate to arrive at the coding allowance.
For example, for 2008 to 2009, individual has made a £1,000 subscription for VCT shares. Tax relief due is £1,000 x 30% = £300.
Example – England, N.Ireland and Wales Income tax rates 2016 to 2017 and 2017 to 2018
If the individual is liable at basic rate, the coding is £300 x 100 / 20 = £1,500. The tax code will give relief of 1500 x 20% = £300.
If the individual is liable to tax at higher rate. The coding adjustment is £300 x 100 / 40 = 750. The tax code will give relief 750 x 40% = £300.
If the individual is liable to tax at the additional rate, the coding adjustment is £300 x 100 / 45 = 666. The tax code will give relief 666 x 45% = £300.
Example – Scottish Income tax rates 2016 to 2017 and 2017 to 2018
If the individual is liable at basic rate, the coding is £300 x 100 / 20 = £1,500. The tax code will give relief of 1500 x 20% = £300.
If the individual is liable to tax at higher rate. The coding adjustment is £300 x 100 / 40 = 750. The tax code will give relief 750 x 40% = £300.
If the individual is liable to tax at the additional rate, the coding adjustment is £300 x 100 / 45 = 666. The tax code will give relief 666 x 45% = £300.
Example – Scottish Income tax rates 2018 to 2019 until 2022 to 2023
If the individual is liable at Starter rate, the coding is £300 x 100 / 19 = £1,579. The tax code will give relief of 1579 x 19% = £300.
If the individual is liable at basic rate, the coding is £300 x 100 / 20 = £1,500. The tax code will give relief of 1500 x 20% = £300.
If the individual is liable at intermediate rate, the coding is £300 x 100 / 21 = £1,429. The tax code will give relief of 1429 x 20% = £300.
If the individual is liable to tax at higher rate. The coding adjustment is £300 x 100 / 41 = 732. The tax code will give relief 732 x 41% = £300.
If the individual is liable to tax at the top rate, the coding adjustment is £300 x 100 / 46 = 652. The tax code will give relief 652 x 46% = £300.
Example – Scottish Income tax rates 2023 to 2024 onwards
If the individual is liable at Starter rate, the coding is £300 x 100 / 19 = £1,579. The tax code will give relief of 1579 x 19% = £300.
If the individual is liable at basic rate, the coding is £300 x 100 / 20 = £1,500. The tax code will give relief of 1500 x 20% = £300.
If the individual is liable at intermediate rate, the coding is £300 x 100 / 21 = £1,429. The tax code will give relief of 1429 x 20% = £300.
If the individual is liable to tax at higher rate. The coding adjustment is £300 x 100 / 42 = 715. The tax code will give relief 715 x 42% = £300.
If the individual is liable to tax at the top rate, the coding adjustment is £300 x 100 / 47 = 639. The tax code will give relief 639 x 47% = £300.
Example – Scottish Income tax rates 2024 to 2025 onwards
If the individual is liable at Starter rate, the coding is £300 x 100 / 19 = £1,579. The tax code will give relief of 1579 x 19% = £300.
If the individual is liable at basic rate, the coding is £300 x 100 / 20 = £1,500. The tax code will give relief of 1500 x 20% = £300.
If the individual is liable at intermediate rate, the coding is £300 x 100 / 21 = £1,429. The tax code will give relief of 1429 x 20% = £300.
If the individual is liable to tax at higher rate. The coding adjustment is £300 x 100 / 42 = 715. The tax code will give relief 715 x 42% = £300.
If the individual is liable to tax at advanced rate. The coding adjustment is £300 x 100 / 45 = 666. The tax code will give relief 666 x 45% = £300.
If the individual is liable to tax at the top rate, the coding adjustment is £300 x 100 / 48 = 625. The tax code will give relief 639 x 48% = £300.
Example –Welsh income tax rates 2019 to 2020
If the individual is liable at basic rate, the coding is £300 x 100 / 20 = £1,500. The tax code will give relief of 1500 x 20% = £300.
If the individual is liable to tax at higher rate. The coding adjustment is £300 x 100 / 40 = 750. The tax code will give relief 750 x 40% = £300.
If the individual is liable to tax at the additional rate, the coding adjustment is £300 x 100 / 45 = 666. The tax code will give relief 666 x 45% = £300.
Where the estimated liability straddles the rates, use the best estimate you can.
Where a customer is making a claim for Enterprise Investment Scheme, Seed Enterprise Investment Scheme, Social Investment Tax Relief or Venture Capital Trust, if the relief claimed for each item is more than £10,000 the customer will need to be put into SA. This is applicable to all UK (England, N.Ireland, Scotland and Wales) customers. SAM100060.
More information about how to calculate the coding amount is in the Venture Capital Schemes Manual at VCM51070.