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CAMPAIGNS - OXFORD TECHNOLOGY VCTS

A CAMPAIGN MANAGED BY SHARESOC

Oxford Technology Venture Capital Trusts

(the latest news is at the foot of this page)


This campaign was launched in March 2014, following notice from HMRC of the loss of VCT status at two of the Oxford Technology VCTs. The following information was issued in a press release:


ShareSoc launches Group for concerned shareholders in the Oxford Technology VCTs

The Oxford Technology VCT (OXT) and Oxford Technology 3 VCT (OTT) have announced that HMRC has withdrawn their VCT status. This has been done because one of the Venture Capital Trust rules is that no more than 15% of a fund can be invested in one company. Both these companies have a holding in Scancell, an AIM listed company, and the share price of Scancell rose rapidly so that the rule was inadvertently breached as a result of a small funding round in July  2013, in which the two VCTs participated. The rule breach was reported to HMRC as soon as the mistake was realised, in October 2013.

This is a pretty disastrous event for investors in these VCTs because as the announcement says:

- any 'front end' income tax relief in shares issued within a period of 5 years prior to the notice from HMRC will be withdrawn;

- any deferred gains come to charge;

- subsequent dividends from the Company will not be exempt from income tax;

- any subsequent gains on disposal of shares in the Company will not be exempt from Capital Gains Tax.

In other words, the tax relief obtained by investors in the company may be lost which is the most damaging impact. In addition, the company's exemption from Corporation Tax will be lost.

Oxford Technology are appealing against the decision but say that if it is not successful they may have to consider the company's future as a listed vehicle. Note that Oxford Technology VCT 2 and VCT 4 are apparently not affected by this problem.

Formation of Shareholder Group

Shareholders in the company, supported by ShareSoc, have formed a Shareholder Action Group to co-ordinate action, keep shareholders informed and make representations to HMRC or the Treasury and to the Company on this matter. In addition if an appeal against the decision is lost, they may develop policies on what should happen to these companies that are in the best interests of shareholders.

Comment from a shareholder

It seems somewhat unreasonable to withdraw VCT status on what is a minor technical breach of the rules that the company itself reported, and presumably could have been quickly rectified. Tim Grattan, one of the affected shareholders had this to say: "As a result of this minor, inadvertent breach of VCT rules, which was freely and promptly disclosed to the HMRC, over 700 individual shareholders, who are entirely blameless, have now been hit with disproportionate penalties, while the directors and managers of the company escape scott-free. This seems morally unjust, but seemingly simple to reverse."


- End of press release -


Important Note: Investors who claimed capital gains roll-over relief prior to April 2004 in these VCTs will get their gains rolled back into charge in the 2013-2014 tax year if VCT status is lost and are advised to take immediate professional advice on this matter if you are in any doubt about the implications. Likewise anyone who claimed income tax relief on new share subscriptions in the last 5 years will lose the relief. The note from the AIC below gives more information that might assist you. Note that ShareSoc cannot unfortunately provide individual tax or investment advice.

 

Announcement by the companies. This document gives you the announcement by Oxford Technology VCT (that for VCT 3 was similar): OT1_Letter-to-Shareholders


ShareSoc subsequently sent this letter to HMRC on behalf of shareholders: HMRC_Letter .


More Information:  The following useful notes have been published by the Association of Investment Companies (AIC) and HMRC on the implications of loss of VCT approval and the rules for VCTs:


AIC - Implications of withdrawal of VCT approval

(if you have difficulty opening the linked document, do a right click on it and open in a new page).

HMRC - Venture Capital Trusts tax treatment


Update 27/3/2014. Both VCTs have now sent a letter of appeal to HMRC. The appeals will be lead by Graham Aaronson QC. The likely timescale is not currently known.


Update 15/4/2014. See to the right for details of a meeting for shareholders which has been arranged.


Update 21/4/2014. A note on the Oxford Technology VCT web site indicates that HMRC have offered to meet to discuss the appeal and any request for re-approval on the 28th April. If the matter cannot be resolved and a subsequent appeal to the First Tier Tribunal is required then the likely timescale for a hearing is 9 to 14 months.


Update 24/5/2014. A report on the meeting for shareholders in the affected companies held on the 20th May is present in this document: OXTAG-Meeting-Report (click on to open as a pdf document).


Update 8/6/2014. HMRC have “set aside” their decision to withdraw VCT status, and will reconsider the issue afresh. More details and other news in this pdf document: Update-2014-06-08.


Update 1/7/2014: This group has issued a note on the Corporate Governance issues at these VCTs with some recommendations on how they should be improved. See: Corporate-Governance-Issues


Update 21/7/2014: Roger Lawson, Deputy Chairman of ShareSoc, has sent a letter to Lucius Cary concerning the lax voting arrangements at the Oxford Technology VCTs. You can read it here: Cary Letter 2014-07-21 (click on to access). We consider this an important matter so as to ensure that all shareholders in these companies get the opportunity to vote and are aware of the Annual General Meetings of these companies (now rescheduled to the 27th August).


We understand that new Notices of the AGMs will be issued together with revised (i.e. replacement) proxy voting forms. We will reconsider our voting arrangements and give further advice on how to vote as soon as we see the new resolutions and any proposed changes (which of course we have been pushing for). More news will follow as more is publicly disclosed.


Update 23/7/2014: Mr Cary has responded to the aforementioned letter concerning register use and voting arrangements by stating that the revised Notice will be circulated to those on the register held by Capita who will also be receiving the returned proxy forms thereafter.


Update 31/7/2014: The boards of the two affected VCTs announced changes to the directors. ShareSoc issued this press release welcoming the changes: Press057


Update 3/8/2014: Revised AGM Voting Recommendations. ShareSoc’s new voting recommendations for the forthcoming Annual General Meetings of these VCTs have been issued - see this document for details: Voting-Recommendations-2


Update 5/8/2014: The VCTs have announced that they have received a response from HMRC to their appeals. HMRC indicate changes are required if VCT status is to be retained and they have specified 40 days for a response from the company. The latter are considering whether they can comply.


Update 27/8/2014: New boards were elected at these VCTs at the AGMs today. See Press059 for more information (a full report on the meetings will also soon be available).


Update 12/9/2014: The two affected VCTs have announced that the corrective action required by HMRC to enable the companies to retain VCT status has now been implemented and HMRC has therefore declared that sufficient to retain VCT status in compliance with the rules. Shareholders tax reliefs will therefore be unchanged. As the companies have declared that the holdings of Scancell are now as they were prior to July 2013, presumably some have been disposed of.


Further news on this campaign will be posted here as it arises, but as the above news achieves the main objectives of the campaign, any further posts are likely to be more infrequent. The historic poor financial performance of the Oxford Tech VCTs remains an issue however.


Please use the Contact page to obtain further information or register an interest in this campaign.

HAVE A PROBLEM?

Go to the Contact page if you have concerns about any other company in which you are a shareholder.

As a minimum we will give you advice on how it can be progressed.

WORDS AND ACTION

Actions speak louder than words. You need to take action if matters are to change. So please support this campaign.


If you wish to make a voluntary contribution to support the costs of running this campaign please go to this page of our web site: Donations