ACCA Advanced Taxation (ATX) Practice Exam

True or False: A chargeable gain occurs for VCT upon the disposal of shares within three years.

1. True

2. False

3. Only if the shares increase in value

4. True, unless held for more than 10 years

The correct answer is: False

A chargeable gain does not occur for a Venture Capital Trust (VCT) upon the disposal of shares within three years. This is because, in the context of VCTs, there are special reliefs designed to encourage investment in qualifying companies. When shares in a VCT are disposed of, if the investor has held those shares for a period of less than three years, any gain that arises on disposal is exempt from Capital Gains Tax. The purpose of this exemption is to promote investment in VCTs, which are aimed at funding small to medium-sized businesses. It's important to note that the time frame beyond three years also plays a crucial role in tax implications, but in this specific scenario regarding the first three years, no chargeable gain arises at the point of disposal. Therefore, stating that it is false that a chargeable gain occurs upon disposal within three years accurately reflects the applicable tax rules governing VCTs.