Let us say you go into your local shop to buy a CD or a packet of cigarettes. You see that the item is labelled £10 plus VAT (yes, I know, it’s more likely to be something like £9.99, but I’m making the price £10 so that the sums are easier). What does this actually mean in tax terms, and why is it so important?
Share buybacks are an attractive way in which VCT investors can realise their investment. However, HMRC is concerned that this technique is also being used to access another round of tax relief, without necessarily supplying new cash to the businesses for which the scheme was intended to benefit.
So what is the problem, and what is the Government proposing to do about it?