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HMRC internal manual

Venture Capital Schemes Manual

HM Revenue & Customs
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VCT: VCT approval: breach of approval conditions: meaning of ‘outside the control’

The breach must be due to an event outside the control of the VCT; if the VCT was capable of taking action to avoid the breach it will not be considered to be ‘outside the control’ of the VCT.

An example of an event outside the control of a VCT might be a take-over bid leading to either the disposal of shares in a qualifying investee company or the investee company ceasing to qualify under the Scheme. However, a commercial decision by the VCT to dispose of an investment would not be an inadvertent breach.

A further example might be if a breach occurs as a direct result of an action by a ‘third party’ in circumstances where the VCT or its advisors are not in a position to prevent such action. In such a case HMRC will consider the individual circumstances of the action in evaluating whether the breach is ‘outside the control’.

A failure by the VCT to make sufficient investments to meet the 70% test at the end of the provisional approval period would not, outwith exceptional circumstances, be considered outside its control.