Shareholders may wish to either:
- Give your VCT shares to your beneficiaries during your lifetime. This may reduce the overall value of an estate prior to your death as a potentially exempt transfer *; or
- Make a bequest of your VCT shares to your beneficiaries through your will.
* A potentially exempt transfer (PET) is a gift from one person to another that is not liable to inheritance tax, provided the person making the gift lives for a minimum of 7 years after the transfer is made. If death occurs within 7 years, inheritance tax is payable to the extent that the total of all PETS in the previous 7 years exceeds the nil rate band.
Individuals who receive VCT shares as a gift or as an inheritance can benefit from tax free income and tax free capital gains. However, there are other tax implications of gifting VCT shares, which need to be carefully considered before any actions are taken. To view a summary of these tax implications click on the links below:
Transfer to spouse/civil partner
Transfer to a recipient who is not a spouse of civil partner
Practical and other tax points to consider:-
Notification of the death of a shareholder
In the event of the death of a shareholder, the person dealing with the deceased shareholder's affairs should notify the Registrar.
VCT shares left in your will
You should ensure your executors know what should happen to your VCT shares after your death. To achieve this, your will should contain specific instructions as to who should inherit them. Otherwise, as VCT shares are listed, in the absence of any specific instructions, executors may seek to sell the shares.
Please note that, while shares remain in an estate, there are no VCT tax advantages and the estate may have to declare the income for tax purposes if dividends are paid on the shares.
The following are possible practical steps VCT investors might take to minimise the
time their shares are held in an estate after their death:-
- Find all share certificates – sort out replacements if any missing. Please note that an indemnity be payable to replace a lost certificate in addition to an administration fee charged by the Registrar
- Reduce number of share certificates by asking registrar to consolidate certificates. Please note the Registrar will charge fees for consolidating share certificates
- Ensure share certificates are kept in a safe place
- Ensure the executors know where the latest, most up to date version of your will is kept
Initial VCT income tax relief & deferred capital gains
In the event of death, initial VCT income tax relief is not withdrawn even if death occurs within the minimum holding period. However, any deferred capital gains are extinguished on death.
As VCT shares are listed shares they are valued with an individual's estate and therefore contribute towards its overall value, part of which may be subject to inheritance tax although transfers between spouses are (normally) not subject to inheritance tax.
Estate planning can be a complex area and we strongly recommend that you seek advice from an appropriately approved and qualified adviser who can provide advice based on your personal circumstances.