HM Revenue & Customs (HMRC) has permanently restored venture capital trust (VCT) status to the Oxford Technology (OXT) and Oxford Technology 3 (OTT) VCTs, after they reduced their investment in one of their holdings, biotechnology company Scancell Holdings (SCLP).
Oxford Technology and Oxford Technology 3 lost their VCT status in March after their manager accidentally breached rules on VCT investment limits when investing in pharmaceutical company Scancell – the first and only time that VCTs have had their status stripped since the inception of this type of fund in 1995. VCTs cannot invest more than 15 per cent of their portfolio in a single company as calculated by the last price at which that company's shares were purchased. Loss of VCT status would have resulted in the loss of a number of tax advantages for the funds' shareholders.
Following an appeal against the decision to strip the funds' VCT status, this was temporarily restored in June while HMRC reviewed its position. The VCTs announced on 5 August that HMRC required changes if they were to retain their status and that they had 40 days to comply. This involved the VCTs selling some of their shares in Scancell, and their position in Scancell is now as it was prior to July 2013. The excess shares had been bought when the VCTs took up their rights to purchase additional shares in Scancell as part of a discounted rights issue in August 2013.
Oxford Technology said under its agreement with HMRC that it cannot not disclose how many shares it has sold, however, the VCTs say the sale has resulted in no financial gain or loss to them. Oxford Technology cannot disclose how this was possible as HMRC does not want to set precedents.
Shareholders will not face legal costs for the work of the VCTs' legal adviser, Joseph Hage Aaronson, as he conducted the work pro bono.
HMRC also asked the VCTs to put in place more robust procedures to ensure that they do not breach the investment limits again, and their manager, Lucius Cary, said that they have a 'checklist' in place to make sure they don't do this again.
The VCTs recently changed the composition of their boards, including the removal of Mr Cary as a director on Oxford Technology and Oxford Technology 3. The boards are now considering issues including as a possible merger of the Oxford Technology VCTs.
