The Lemon Fool

No left swipe from Northern for me - yet. I've now redeployed the earmarked funds from my current account elsewhere, having assumed I've finished last in the race. Sod's Law I will now be accepted then rejected with a bounced cheque!

Got my N1 and N2 cheques back today - found them when I got home.

Allocation arrived this morning. No NVT. Split 60/40 between 2 and 3.

There must have been some whopper cheques taken in that morning. Mine was received at 0808 hours.

Flyer.

It must have been bloody close run. They signed for mine at 0805 on the Wednesday and it was filled in full: 33.3% in each of the three, including NVT.

I have NOT yet received confirmation from Northern, but from Clubfinance today:
Dear X
Thank you for applying for the Northern VCTs (top-ups) offers using Clubfinance as your intermediary.
We have now received notification from NVM of the successful applications that NVM have processed with Clubfinance as the intermediary.
I’m happy to confirm that your application for £X appears on this list of successful applications.
Please note that this is the total amount you have been successful for under the offers. It is possible that some or all of your application amount may have been reallocated to the remaining open VCT(s) if your preferred choice of VCT(s) had already reached capacity.
We understand the official confirmations have already been sent or are in the process of being sent out by NVM and we understand that cheques for successful applications are being banked this week.

Very pleased. The portfolio has momentum and low cash drag - not a widespread combination!

HSBC showing that my cheques are being cleared tomorrow.

The Northern shares were issued to the fortunate few today.
Among the fortunate were two directors at Northern 3 (5,541 and 87,045 shares) and two at Northern 2 (7,767 and 25,957 shares)
I normally applaud directors' purchases, but I would be a bit happier if I learned that they only received the application form at 8am in a place remote from Northern Headquarters, and either had to make a substantial train journey or use some express mail service to get to the top of the queue.

So the results are out - with another special of 5p per share making 8p to be paid on 30th June - see http://www.investegate.co.uk/northern-v ... st%20Alert

NAV at 79.1 is below the bid price of 79.5 - investors must have a lot of faith in the manager to make good investments under the new rules!

Cash is about £14 million out of £77 million total assets.

Time to sell? But I am locked in for some time because of the DRIS as I guess are a lot of shareholders who took advantage of the top up offers.

From the Report:-

A substantial number of applications had to be declined and we regret the disappointment felt by unsuccessful applicants. The possibility of future share issues will be kept under review, and will naturally depend on the rate of new investment and realisations from the existing portfolio.

Maybe the disappointed applicants should be given preferential treatment in any future share issue?

Time to sell? But I am locked in for some time because of the DRIS as I guess are a lot of shareholders who took advantage of the top up offers

Not necessarily BBB, first in first out rules apply for both income tax relief and capital gains tax deferral relief on VCTs

https://www.gov.uk/hmrc-internal-manual ... l/vcm51090

https://www.gov.uk/hmrc-internal-manual ... l/vcm53170

timbo003 wrote:Not necessarily BBB, first in first out rules apply for both income tax relief and capital gains tax deferral relief on VCTs

BBB is probably permanently caught on the six month rule with the DRIS.

BBB is probably permanently caught on the six month rule with the DRIS.

I (possibly incorrectly) thought that DRIS purchases were ignored on the six month disposal rule. I have waded through various HMRC documents, but have failed to find any mention of the 6 month disposal rule. Can anyone help with a reference?

I said

BusyBumbleBee wrote:NAV at 79.1 is below the bid price of 79.5 - investors must have a lot of faith in the manager to make good investments under the new rules!
Time to sell? But I am locked in for some time because of the DRIS as I guess are a lot of shareholders who took advantage of the top up offers.

Time to sell? : Well maybe not just yet. Even though half of the 5p special was in the last published NAV half wasn't so there is a bit of upside here. And it maybe that in the last quarter some other holdings have been sold. Good time to sell portfolio companies as the stock markets rise inexorably towards ...

Any way NVT is trading at a premium to last published NAV but Northern 2 (NTV) was and still is priced just below NAV and curiously has more or less the same holdings as NVT (in particular the same holdings that enabled NVT to pay the special) - so have purchased a few thousand of these in the hope that they too will announce a special when they announce their final results shortly.

If one lives in hope and not fear, then it maybe that some of the quality holdings in both will come good before the new more risky investments have time to fail. So one could expect a couple of years of good dividends. Time will tell but the price of both seems to be going up and up.

NTV's NAV is as follows

Northern 2 VCT PLC ("the Company") announces that the unaudited net
asset value per share as at 28 February 2017 was 75.7 pence.

Subsequent to 28 February 2017 the Company has sold its investment in
Cawood Scientific ("Cawood"), the UK's largest independent provider of
analytical laboratory testing services for land-based industries, for
cash proceeds of GBP2.78 million. For the purposes of calculating the
unaudited net asset value per share as at 28 February 2017, the
investment in Cawood has been valued at an amount equivalent to the sale
proceeds.

Bid : 70.50 Offer : 72.50

Seems to me that Northern 2 (NTV) is better value than NVT,

scotia wrote:

BBB is probably permanently caught on the six month rule with the DRIS.

I (possibly incorrectly) thought that DRIS purchases were ignored on the six month disposal rule. I have waded through various HMRC documents, but have failed to find any mention of the 6 month disposal rule. Can anyone help with a reference?

I agreed with DRIS being ignored but it took quite a bit of determined searching to find the absolute answer! The legislation was passed after the 2014 budget so is contained in the Finance Act 2014. The key point is paragraph (1) (8) in bold towards the end.

Section 53, Schedule 10, Venture Capital Trusts, pages 361 to 362
Linked sales
2 (1) After section 264 of ITA 2007 insert—
“264A Restricting relief where there is a linked sale
    (1) This section applies where—
      (a) an individual subscribes for shares (“the relevant shares”) in a VCT (“the VCT”), and
      (b) there is at least one linked sale of other shares by the individual.
    (2) For the purposes of this Part, the amount the individual subscribes for the shares is to be treated as reduced (but not below nil) by the total consideration given for the linked sales of other shares. This is subject to subsection (3).
    (3) If a sale is linked in relation to more than one subscription for shares—
      (a) the consideration for it is to be applied to reduce subscriptions under subsection (2) in the order in which the subscriptions are made, and
      (b) accordingly, to the extent that any consideration has been used to reduce an earlier subscription, it is not available to reduce a later one.
    (4) A sale of shares (“the sold shares”) is “linked” if conditions A and B are met.
    (5) Condition A is that the sold shares are in—
      (a) the VCT, or
      (b) a company which is (or later becomes) a successor or predecessor of the VCT.
    (6) Condition B is that—
      (a) the individual subscribes for the relevant shares in circumstances where—
        (i) the purchase of the sold shares from the individual was conditional upon the individual subscribing for shares in the VCT, or
        (ii) the individual’s subscription for shares in the VCT was conditional upon that purchase, or
      (b) the subscription for the relevant shares and the sale of the sold shares are within 6 months of each other (irrespective of which came first).
    (7) A company (“company X”) is a “successor or predecessor of the VCT” if—
      (a) there is a merger of two or more companies for the purposes of Chapter 5 (see section 323) and—
        (i) the VCT is one of the merged companies and company X is “the successor company” (as defined by that section), or
        (ii) the VCT is “the successor company” and company X is one of the merged companies, or
      (b) section 327 (effect of restructuring of VCT) applies and—
        (i) the VCT is “the old company” and company X is “the new company” for the purposes of that section, or
        (ii) company X is “the old company” and the VCT is “the new company” for those purposes.
    (8) This section does not apply if, or to the extent that, the subscription for the relevant shares is a result of the individual electing to reinvest dividends payable to the individual on shares in the VCT, in acquiring further shares in the VCT.”
  (2) The amendment made by this paragraph has effect in relation to claims for relief by reference to shares issued on or after 6 April 2014.

I agree that DRIS purchases are exempted from the 6 month disposal rule, but my understanding is that it is a limited exemption, I think to prevent part disposals of a holding stopping the holder from operating DRIS of the remaining holding on a tax efficient basis.

However, my understanding is that all other restrictions apply. So, the 5 year hold rule will be relevant for each DRIS purchase from the applicable date (so sales can get slightly fiddly) and a subsequent SALE of DRIS shares will be relevant for the acquisition of further shares in the same VCT within the following six months after the DIS shares are sold. In other words, once acquired, DRIS shares are subject to the same rules as shares otherwise acquired.

Kidman - many thanks for the considerable spadework you put into finding the relevant document. I searched HMRC VCT regulations but couldn't find any relevant info. Surely HMRC don't expect investors in VCTs to read through finance acts to work out the tax implications of what must be a fairly common occurrence. In my case I have several tranches of (new) purchases of a particular VCT, and I also subscribe to its DRIS. So I intend selling an original tranche which is past the 5 year period, and I had hoped that DRIS purchases within 6 months (either way) would have no effect on the sale. This appears to be correct.
And James - yes I appreciate that the DRIS purchases are subject to the 5 year rule, and can be a bit fiddly to manage on a disposal basis. However by repeatedly buying and disposing of multiple tranches in a VCT (after the 5 year period), its not too much of a problem to fit in the DRIS purchases.