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HMRC internal manual

Venture Capital Schemes Manual

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HM Revenue & Customs
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The three relevant years preceding the investment

The three relevant years preceding the investment are determined using the same method that is used for determining the five years over which a company’s annual turnover is averaged for condition B of the age limit condition (see section 175A (for EIS) and section 280C and section 294A (for VCTs)).

The rules are designed to take into account the operating costs of the company for the three years ending with the end date of the company’s most recently filed (and audited, where appropriate) accounts.

Apportionments may be needed where accounting periods are less than a year, or the company is the parent of a group and the accounting periods of subsidiaries are not aligned, or where the company or group has failed to file its accounts within the statutory time limit.

The most recent accounting period is the accounting period with the statutory filing date that falls most recently before the date of the investment. The statutory filing date is the date by which accounts must be filed with Companies House and falls 9 months after the end of the company’s accounting period.

Example 40

Company A has 400 employees. It wants to raise funds under EIS/VCT and must therefore meet the conditions to be a knowledge-intensive company. It wants to raise the funds starting from 6 April 2016. The company has always made up its accounts to 31 December.

To determine if the company meets one of the operating conditions it must identify the relevant three preceding years.

Company A’s most recent filing date before the date of the expected investment is 30 September 2015. The filing date relates to the accounts for the year ending on 31 December 2014.

The three relevant years are 1 January – 31 December 2012, 2013 and 2014.

 

If the company has not filed its accounts by the statutory filing date the relevant three preceding years are the three years ending 12 months before the investment is issued.

However a company may elect to use the period ending 12 months before the date the investment is made, to apply to all investments made in the company before 6 April 2016, under new rules being introduced by Finance Bill 2016.