ANNEX 1:: MINOR CHANGES IN THE LAW MADE BY THE BILL This change is in taxpayers’ favour in principle. But it is expected to have no practical effect as it is in line with current practice.
Change 58: VCT: definition of eligible shares for VCT relief: section 273 and Schedule 2Part 8 (interpretation of Chapter 2)
This change prevents the contention that section 73(1)(b) of FA 1998 was ineffective in deleting the word “preferential” from the definition of “eligible shares” in paragraph 6(1) of Schedule 15B to ICTA.
Paragraph 6(1), in common with section 842AA(14) of ICTA, originally defined “eligible shares” in terms of shares in a company which:
“carry no present or future preferential right to dividends or…assets on its winding up and no present or future preferential right to be redeemed.”
Section 73(1)(b) of FA 1998 omitted the italicised reference to “preferential”. Section 73(6) of FA 1998 provided that the omission had effect:
“for the purpose of determining whether shares or securities are, as at any time on or after 6th April 1998, to be regarded as comprised in a company’s qualifying holdings…”
Section 73(1)(a) of FA 1998 made a similar omission of the word “preferential” from section 842AA(14) of ICTA .
Section 73(6) of FA 1998 sits well with section 73(1)(a) because section 842AA deals with a company’s qualifying holdings; but paragraph 6(1) is in Part 1 of Schedule 15B to ICTA which deals with whether or not an individual is eligible for VCT relief on particular shares.
FA 1998 also omitted the word “preferential” in relation to other provisions associated with venture capital schemes. These omissions were from:
	section 289(7) of ICTA (enterprise investment scheme);
	section 150(8A) of TCGA (business expansion scheme);
	section 150A(8A) of TCGA (enterprise investment scheme); and
	paragraph 9(2) of Schedule 5B to TCGA (enterprise investment scheme: reinvestment).
Section 74(3) of FA 1998 provided that those omissions had effect:
	in relation to shares issued on or after 6th April 1998.
It seems likely that similar wording should have been used in relation to the omission in section 73(1)(b) of FA 1998.
The words quoted earlier from section 73(6) FA 1998 are not reproduced in relation to section 273(1) of this Act. This prevents the contention that section 73(1)(b) of FA 1998 was ineffective in omitting the word “preferential” in paragraph 6(1) of Schedule 15B to ICTA.
Part 8 of Schedule 2 to this Act (interpretation of Chapter 2) ensures that this change does not apply to shares issued before 6 April 2007.