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HMRC internal manual

Venture Capital Schemes Manual

VCT: VCT qualifying holdings: carrying on of a qualifying activity


At the time when the investment is made and at any point thereafter, a qualifying company (either the issuing company or a qualifying 90% subsidiary) must be either carrying on a qualifying trade or preparing to do so. The requirement need not be met by the same company at all times. If trading has not yet commenced when the holding is issued, it is a condition that it must be commenced within two years of the date of issue of the holding in question and must have been carried on continuously since, either by the issuing company or by a qualifying 90% subsidiary.

‘Preparing’ to carry on a trade covers both the setting up of a new trade and the acquisition of an existing trade from its present owner. Where a company acquires a trade by means of first acquiring the company which carries it on, the acquisition of the shares counts as preparation. However see VCM55150 where shares are acquired out of monies raised by the VCT on or after 6 April 2012.

Preparing to trade does not cover preliminary activities such as market research aimed at discovering whether a trade would be likely to succeed, or raising capital, neither does it cover research and development. As regards the date when trading is commenced, see BIM70500 onwards.