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HMRC internal manual

Venture Capital Schemes Manual

HM Revenue & Customs
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VCT: VCT approval: conditions for provisional approval

ITA07/S275; SI1995/1979 Regulation 4

A company which does not meet the conditions for full approval (see VCM54020) may be given provisional approval where it satisfies HMRC that:

  • in relation to the current accounting period and future accounting periods:

    • it has not made and will not make an investment in a company, which breaches the permitted investment limit
  • in relation to the accounting period which is current when the application is made and future accounting periods:

    • its income will be derived wholly or mainly from shares or securities (VCM54050),
    • no holding in any company will represent more than 15% by value of its investments at any time (VCM54200),
    • its ordinary share capital will be included in the official UK list throughout. From 6 April 2011 the ordinary share capital of a VCT no longer has to be included in the official UK list. The condition becomes that it must be admitted to trading on a regulated market in accordance with Directive 2004/39/EC of the European Parliament (see VCM54030), and
    • it will not retain more than 15% of its income derived in them from shares and securities (see VCM54210).
  • in relation to an accounting period of the company beginning no more than 3 years after approval is given or, if earlier, when approval takes effect, and in following accounting periods:

    • at least 70% by value of its investments will be in qualifying holdings of shares or securities throughout (VCM54060 onwards),
    • at least 30% by value of its qualifying holdings will be in holdings of eligible shares throughout (VCM54110).
    • from 6 April 2011 at least 70% by value of its qualifying holdings will be in holdings of eligible shares throughout (VCM54110).

If further ordinary shares are issued the relaxation described in VCM54220 will apply.

With effect from 6 April 2007 the term ‘investment’ in the 70% qualifying holding condition and 15% holding limit condition includes cash and other funds held by the VCT or held by a third party on its behalf - see VCM54060.

A company meeting the conditions for provisional approval will be sent an approval notice specifying:

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

If the approval is to take effect from a date earlier than that on which approval is given, the 3 year period mentioned above runs from that earlier date.

Notices giving provisional approval may show additional conditions to be met by the company which are designed to ensure that it meets the conditions outlined above. The company may appeal against the inclusion of additional conditions.