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Subscriptions for shares on which deferral relief could be claimed also counted towards the permitted maximum of £100,000 on which disposal relief is available, VCM52040. But there was a separate £100,000 limit for the purposes of claiming deferral relief only. In the extreme case an investor could buy £100,000 worth of shares in a VCT from a previous holder of the shares. »Ê¹ÚÌåÓýappse shares would be exempt from CGT when they were disposed of but would not qualify for deferral relief because they were purchased and not subscribed for. »Ê¹ÚÌåÓýapp investor would have used up their permitted maximum for the year. Later in the same year they could subscribe for £100,000 worth of shares in a VCT. »Ê¹ÚÌåÓýappse shares would not be exempt from CGT when they were sold, because they were acquired in excess of the permitted maximum. But assuming the investor received some ‘front-endâ€� income tax relief on the investment, the expenditure on the shares subscribed for would qualify for CGT deferral relief.

Example

In the tax year 1996-97 an investor makes the following acquisitions of shares in approved VCTs:

• May 1996 buys 30,000 shares in A plc, cost £55,000.
• September 1996 subscribes for 50,000 shares in B plc, cost £75,000. »Ê¹ÚÌåÓýapp investor receives ‘front-endâ€� income tax relief on this investment.

»Ê¹ÚÌåÓýapp 30,000 A plc shares bought in May 1996 and £45,000 worth of the B plc shares subscribed for in September 1996 will be exempt from CGT when they are disposed of. »Ê¹ÚÌåÓýapp balance of the shares acquired in September 1996 (£30,000 / £75,000 x 50,000 = 20,000) remain within the charge to CGT. But all the expenditure of £75,000 qualifies for CGT deferral relief.