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HMRC internal manual

Venture Capital Schemes Manual

VCT: VCT approval: income retention condition

ITA07/S274(2) and S276

The income retained must not exceed 15% of the gross income from shares and securities.

This does not apply if the amount the company would be required to distribute is less than £10,000. Where the accounting period (defined in CTA09/S9 and S10) is less than 12 months, the figure of £10,000 is proportionately reduced.

Nor does it apply where the company is required to retain more than 15% of its income by law. However in these circumstances the company must not retain any more than the law requires unless the amount of excess it retains together with any income distributed is less than £10,000 (or a proportionately reduced amount where the accounting period is less than 12 months).

Dividends declared in respect of an AP will not be treated as constituting income retained in that AP, provided that the dividend has been declared by the time that the accounts are finalised.