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HMRC internal manual

Venture Capital Schemes Manual

SEIS: income tax relief: issuing company: control and independence requirement


The control test

This test stipulates that the company must not, at any time in period A (see VCM31140) control, whether on its own or together with any person connected with it, any company which is not a qualifying subsidiary of the issuing company. There must be no arrangements at any time during period A by virtue of which this test could be breached, whether during period A or at any other time.

For the meaning of ‘qualifying subsidiary’ see VCM34140.

The independence test

The company is not a qualifying company if it is under the control of another company or of another company and any person or persons connected with that other company. It may not, therefore, be a subsidiary in period A.

With effect for shares issued on or after 6 April 2013, any on-the-shelf period will be ignored when determining whether a company is or has been under the control of any other company.

There must not be any arrangements at any time during period A by virtue of which the independence requirement could be breached, either during period A or at any other time. But this rule does not apply where the arrangements relate to transactions to which VCM37030 applies.

See below for the meaning of ‘arrangements’ in this context.

Meaning of ‘control’

For the purpose of determining whether a company is under the control of another company on or after 21 March 2000, ‘control’ has the meaning given to it by ITA07/S995. That is, the power of any person by means of the holding or shares or voting power in any company, or as a result of any powers conferred by a document regulating the company or any other company, that the affairs of the company are conducted in accordance with the person’s wishes.

Meaning of ‘connected’

‘Connected’ has the meaning given in ITA07/S993, (see CG14580 onwards, which deals with similarly worded legislation).

Note that, as well as the more obvious connections, ITA07/S993(7) provide that persons are to be regarded as connected in relation to a company if they act together to secure or exercise control of that company. The provision extends to persons acting on the direction of any of those persons.

Meaning of ‘on-the-shelf period’

‘On-the-shelf period’ means a period during which the issuing company has not issued any shares other than subscriber shares and has not begun to carry on, or make preparations for carrying on, any trade or business.

Meaning of ‘arrangements’

‘Arrangements’ for this purpose is as defined in ITA07S257HJ(1). It includes any scheme, agreement or understanding, transaction or series of transactions, whether or not legally enforceable.