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HMRC internal manual

Venture Capital Schemes Manual

SEIS: income tax relief: general requirements: spending of the money raised requirement


The money raised from the share issue must be spent by the end of period B (see VCM31140), for the purpose of the qualifying business activity (see VCM33050) for which it was raised.

This is to ensure that companies do not raise more money than they actually need in order to allow investors to obtain tax relief. In most cases companies will have a business plan which makes it clear why the monies are needed, and how the company intends to use them for the business within the necessary timescale.

The company’s other sources of income may be a relevant factor in determining whether the monies raised by the relevant share issue have been spent. This will particularly be the case where trading income is available to meet the company’s day to day running costs. In general it is not appropriate to assume that expenditure has been met first and foremost out of the monies raised by the share issue.

If an insignificant part of the money is employed for some other purpose, or an insignificant part is not spent, this is to be disregarded.

Spending money to acquire shares in another company

The legislation specifies that spending money on the acquisition of shares or stock in a company does not of itself amount to spending the money for the purposes of a ‘qualifying business activity’. This does not prevent the money being used to acquire shares in a subsidiary company, providing that after the share issue the subsidiary is a qualifying 90 percent subsidiary (see VCM34040) and that subsidiary then goes on to use the money for a qualifying business activity carried on by it (which will exclude the acquisition of shares or stock in another company).