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HMRC internal manual

Venture Capital Schemes Manual

VCT: VCT approval: conditions for full approval

ITA07/S274

To be approved as a VCT a company must not be a close company and must satisfy HMRC that in relation to its most recent complete accounting period:

* the VCT’s ordinary share capital has been or will be admitted to trading on a regulated market in accordance with Directive 2004/39/EC of the European Parliament (seeVCM54040)   listing condition
     
* its income in that accounting period was derived wholly or mainly from shares or securities (see VCM54050).   nature of income condition
* it did not retain more than 15% of its income derived in that accounting period from shares and securities (see VCM54060).   income retention condition
* no holding in any company represented more than 15% by value of the VCT’s investments at any time during that accounting period (see VCM54070)   15% holding limit condition
* at least 70% by value of its investments were in qualifying holdings of shares or securities throughout that accounting period (see VCM54080 onwards)   70% qualifying holdings condition
* for accounting periods ending before 6 April 2018, and in relation only to shares issued before 6 April 2011, and to shares acquired using protected money before 6 April 2018: at least 30% by value of its qualifying holdings were in holdings of eligible shares throughout that accounting period (see VCM54140)   30% eligible shares condition
* at least 70% by value of its qualifying holdings were in eligible shares throughout that accounting period (see VCM54140)   70% eligible shares condition
* the VCT has not made, and will not make in future, an investment which is neither of: an investment included in the company’s qualifying holdings; an investment within subsection (3A)   non-qualifying investments condition
* the VCT has not made, and will not make in future, an investment, which breaches the permitted investment limit (see VCM54180)   investment limits condition
* for investments made in accounting periods starting on or after 6 April 2018: the company has not breached, and will not breach in future, the minimum investment on further issue condition (see VCM54182)   minimum investment on further issue condition
* the VCT has not made, and will not make in future, an investment in a company which breaches the permitted maximum age limit (see VCM54183)   permitted maximum age condition
* the VCT has not made, and will not make in future, an investment in a company which breaches the prohibition on business acquisitions (see VCM54184)   no business acquisition condition

If the VCT issues further ordinary shares, the relaxation described in VCM54170 will apply.

A company satisfying these conditions will receive an approval notice (VCM54300) specifying:

  • the date on which the approval is given, and
  • the date from which approval shall have effect.

The term ‘investment’ throughout ITA07/Part 6/CH3 includes cash and other funds held by the VCT or held by a third party on its behalf- see VCM54090.