Statement of Practice 1 (2000)
Published 3 August 2000
© Crown copyright 2000
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This publication is available at https://www.gov.uk/government/publications/statement-of-practice-1-2000/statement-of-practice-1-2000
The Corporate Venturing Scheme (CVS) provides relief against Corporation Tax (‘investment relief’) in certain circumstances to companies investing in new shares of other companies. Where a company hopes to use the scheme to attract investment, paragraph 89, Schedule 15, Finance Act 2000 (FA2000) enables it to apply to - The Commissioners for HM Revenue and Customs (HMRC) for an advance clearance notice. Such a notice provides confirmation that the Commissioners for HMRC consider that the conditions for relief under the scheme, other than those applying to the investor, will be met in relation to the proposed issue of shares at the time the issue is made. In the case of those conditions which have to be met throughout a qualification period, however, there can of course be no certainty until after the end of that period that they will be met.
This Statement of Practice gives guidance to companies wishing to obtain advance clearance.
All references to paragraphs in this Statement are to paragraphs of Schedule 15, FA2000.
Procedure
Applications should be sent to:
The Small Company Enterprise Centre
TIDO
Ty Glas
Llanishen
Cardiff
CF14 5ZG
Under FA2000 Schdule 15 Paragraph 91 the Commissioners for HMRC must respond to an application within 30 days after receiving the application. The Commissioners for HMRC may request further particulars, and if they do their response must be given within 30 days after the last such request was complied with.
Content of application - general
In order to consider applications the The Commissioners for HMRC need certain basic information and assurances. To assist companies in preparing their applications, an outline of what is needed is given below. However, this is not necessarily an exhaustive list in all cases, and each applicant must fully and accurately disclose all facts and circumstances material for the decision of the The Commissioners for HMRC (FA2000 Schdule 15 Paragraph 89). The application will be considered solely by reference to the material provided by the company in its application or in response to a request for further particulars.
It will be helpful if applications follow the order set out below, each item being expanded as necessary and any further information being added at the end. This will enable the The Commissioners for HMRC to come to a decision on the application as soon as possible.
For the purposes of the scheme, an ‘issue of shares’ consists of all the shares of the same class which are issued by a company on the same day. An advance clearance notice can be given only in respect of a single issue of shares. If it is expected that there will be more than one issue within a short period of time, please say so. Any clearance will apply only to the issue or issues in respect of which information has been given, so if an advance clearance notice is sought in respect of more than one issue, relevant information must be provided in respect of each of them.
Information and documents needed
1. General
The name of the tax office dealing with the company making the application, and the tax reference. If the company is newly formed and the tax office is not yet known, state the address of the registered office.
If the company has previously made any application for an advance clearance notice it will be helpful if the Board’s reference(s) can be quoted.
2. Accounts and other documents
a. Copies of the latest available financial statements for the company, or in the case of a group the financial statements for the group and for each group company.
b. A copy of any prospectus or memorandum or other document to be made available to prospective investors or their advisers (or a draft of any such document).
c. A draft copy of any subscription agreement which is to be made with any investor.
3. Transactions subsequent to accounts
Particulars of any material changes or events which have occurred since the date of the latest balance sheet, or which are expected to occur before the issue takes place.
4. The company
The following particulars are needed in relation to the company which is to issue the shares:
- a. confirmation that the ‘unquoted status’ requirement set out in FA2000 Schdule 15 Paragraph 16 will be satisfied
- b. confirmation that the ‘independence’ requirement set out in FA2000 Schdule 15 Paragraph 17 will be satisfied when the shares are issued
- c. details of the expected ownership of its ordinary share capital following the issue of the shares, with sufficient information to show that the ‘individual owners’ requirement set out at FA2000 Schdule 15 Paragraph 18 will be satisfied at that time
- d. confirmation that the ‘partnerships and joint ventures’ requirement set out in FA2000 Schdule 15 Paragraph 19 will be satisfied when the shares are issued
- e. if, at the time the shares are issued, it will have any subsidiary or control any other company:
- the name of each such company, together with the name of its tax office and its tax reference or, if there is no tax office, the address of its registered office
- a statement or diagram showing the shareholding interests of each group company in other group companies, sufficient to show that all subsidiaries will be ‘qualifying subsidiaries’ as defined at FA2000 Schdule 15 Paragraph 21 - f. sufficient information to establish whether the ‘gross assets’ requirement set out in FA2000 Schdule 15 Paragraph 22 will be satisfied - see Statement of Practice 2 (2000)
- g. a description of each activity comprised in any trade carried on, or to be carried on, by the company and, in the case of each subsidiary or controlled company mentioned at (e) above, each activity comprised in any trade carried on, or to be carried on, by that subsidiary
5. The share issue and the money raised
a. Details of the total number of shares expected to be issued to investors seeking investment relief (where known), the nominal value of such shares, the rights which they will carry, and the price at which they are expected to be issued.
b. Details of the activity or activities for which it is intended that the money raised by the issue will be used.
c. In the case of a company which will have subsidiaries at the time when the shares are issued, the identity of the company or companies which will use that money.
d. Confirmation that each trade or other activity for which the money will be used will be carried on wholly or mainly in the UK - see Statement of Practice 3 (2000).
Undertakings needed
a. That the company intends that the money raised by the share issue will be used within the time set out at FA2000 Schdule 15 Paragraph 36.
b. That the shares to be issued to corporate investors wishing to obtain investment relief will not be issued unless they have been subscribed for wholly in cash and that cash has actually been paid.
c. That those shares will be issued for commercial purposes and not as part of a scheme or arrangement which has as a main purpose the avoidance of tax.
d. That the issuing arrangements in respect of the shares will not include any arrangements of the kind set out at FA2000 Schdule 15 Paragraph 37.
Informal EIS clearances
Where subscribers to the same issue of shares are expected to include individuals who may wish to claim relief under the Enterprise Investment Scheme (EIS), any request for an informal clearance under the EIS should be sent with the CVS application.