Hospitality Today Aug-Sep 2016 - Page 24

Do pubs face ‘VCT’ tax relief threat? 24 | Hospitality Today | Aug/Sept 2016 by Susanna Gilmartin and Rahanna Choudhury The Finance Act 2015 introduced new rules preventing Venture Capital Trust (VCT) investment to acquire businesses, which has caused considerable speculation that pubs in particular will be hit hardest. Why and how? What are the new rules? What is a VCT? However, investment in businesses is still permitted in the following circumstances: VCTs are investment vehicles which provide private equity capital for small businesses to help them grow. The advantages for those investing in a VCT is up to 30% income tax relief each tax year on investments up to £200,000 provided VCT shares are kept for at least five years, tax free dividends and no capital gains tax. Why are pubs in particular under threat? Many pubs have turned to investment from VCTs in order to stay afloat and combat ever growing competition from supermarkets selling cheap alcohol. In summary, the rule that has caused the greatest concern is the prevention of VCT investment to acquire a business. This covers third party acquisitions and also management buy-outs. companies raising an investment where the amount of the investment is at least 50% of the company’s annual turnover; and new businesses and businesses that are owned by another company provided they receive their first investment from a VCT within seven years of the date of their first commercial sale. A first commercial sale would be, for example, when a pub first opened its doors to customers and sold its first pint.