The taxman's decision to take away venture capital trust status from Oxford Technology is "very worrying for investors", the Association of Investment Companies says.
The AIC said this is the first time HMRC has withdrawn the status of a VCT.
Oxford Technology made a stock exchange announcement about HMRC's ruling on Oxford Technology VCT Plc and Oxford Technology 3 VCT Plc.
The firm said it had made an inadvertent breach and had told HMRC about it.
It exceeded the maximum threshold of 15 per cent that a VCT fund can invest in any one company.
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The withdrawal of VCT status means the tax advantages of approval for the company and its investors will no longer apply.
For the company its exemption from Corporation Tax on chargeable gains is lost and for investors in the company any 'front end' income tax relief in shares issued within a period of five years prior to this notice will be withdrawn.
Other consequences include subsequent dividends from the company not being exempt from income tax and any subsequent gains on disposal of shares in the company will not be exempt from Capital Gains Tax.
Oxford Technology VCT PLC said it intends to appeal against this decision and has 30 days in which to do so.
In a statement it said: "In the event that the appeal is not successful the directors of the company will need carefully to review the company's options and consider its future as a listed company."
Ian Sayers, director general of the Association of Investment Companies, said:
"This is a very worrying time for investors in these two VCTs.
"We understand that both companies are going to appeal HMRC's decision and so investors may want to speak to their financial advisers to understand the implications of these announcements.
"This is the first time that HMRC has withdrawn the status of a VCT. Although these VCTs are not members of the AIC, we will be producing a general guide on the implications of the loss of VCT status which will be available on our website shortly."