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HMRC internal manual

Venture Capital Schemes Manual

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HM Revenue & Customs
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VCT: VCT approval: investment limits condition

ITA07/S274(2) and S280B

From 17 July 2012 a VCT is prohibited, in any accounting period, from making any investment in a company which exceeds the permitted investment limits. The permitted limit in question is the same as the limit which applies for the purposes of ITA07/S292A in determining whether a holding is ‘qualifying’ or not (seeVCM55130) - £5 million from 6 April 2012. Note, though, that unlike S292A, this condition takes into account only investments made in a company and does not require investments made in any of the company’s subsidiaries to be taken into account.

To determine whether the limit is breached, the VCT must add the amount of its current investment together with any of the following received by the investee company during the year ending on the day of the VCT’s current investment:

  • Any other VCT investment (whether from this VCT or any other VCT),
  • An amount subscribed for shares in respect of which the investee company has provided HMRC with a compliance statement under ITA07/S205 (a form EIS1),
  • An amount subscribed for shares in respect of which the investee company has provided HMRC with a compliance statement under ITA07/S257ED (a form SEIS1),
  • Any other risk capital investment in the company which is regarded as an EU approved State aid covered by the Community Guidelines on Risk Capital Investments in Small and Medium-sized Enterprises (or any successor community guidelines).

This condition applies only in respect of investment in the investee company itself and does not require the VCT to consider any investments made in any other company belonging to a group of which the investee company is a member.

It applies irrespective of when the VCT raised the funds being invested.

Risk capital State aids other than EIS, SEIS or VCT investments

The UK Government does not maintain a list of other Risk Capital State aids. The most commonly encountered UK Risk Capital State aids are likely to include Enterprise Capital Funds and certain regional funds including JEREMIE and JESSICA funds. However, there are a number of others both in the UK and in the European Community. A company which has received any risk capital funding either directly from a Government source or otherwise involving some degree of Government support or intervention, should check with the administrator of the fund or the support whether it is considered to be State aid covered by the Community Guidelines mentioned above.