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HMRC internal manual

Venture Capital Schemes Manual

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VCT: VCT qualifying holdings: maximum amount to be raised annually through risk capital measures

ITA07/292A

Annual investment limit and ‘relevant investments’

Companies issuing shares or securities on or after 6 April 2007 and where the investment is made out of monies raised by the VCT on or after that date, are subject to an investment limit which operates on a rolling twelve-month basis.

But see also VCM54180 as regards the addition to the VCT approval conditions of a further restriction on the amounts to be invested in any company in a twelve-month period, which applies for investments made on or after 17 July 2012 and which has effect regardless of when the VCT’s monies were raised. That restriction renders ITA07/S292A somewhat redundant, other than in cases where the VCT approvals condition at ITAS274(2) and S280B is breached in circumstances which do not result in the VCT having its approval withdrawn. In such cases S292A still applies to treat the holding as non-qualifying.

In respect of any issue of shares or securities to which this limit applies, the legislation looks at ‘relevant investments’ made in the company, or in any subisidiary, during the 12-month period ending with the date that holding is issued. If the limit is breached, the whole holding will be treated as non-qualifying as ITA07/S286(4) and (5) does not apply to treat it as two separate holdings.

For share or securities issues on or after 19 July 2007 and before 6 April 2012, the annual investment limit is £2m. For that period, ‘relevant investments’ include:

  • an investment of any kind made by a VCT,
  • an issue of shares in respect of which the company provides an EIS compliance statement (EIS1),
  • an issue of shares in respect of which the company provides a CVS compliance statement (CVS1).

For issues of shares or securities on or after 6 April 2012, the annual investment limit is £5m. From that date, ‘relevant investments’ include:

  • an investment of any kind made by a VCT,
  • an issue of shares in respect of which the company provides an EIS compliance statement (EIS1),
  • an issue of shares in respect of which the company provides an SEIS compliance statement (SEIS1),
  • any other investment which is a State aid approved by the European Commission in accordance with the Community Guidelines on Risk Capital Investments in Small and Medium-sized Enterprises (as replaced or amended).

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.