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HMRC internal manual

Venture Capital Schemes Manual

From
HM Revenue & Customs
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VCT: VCT qualifying holdings: employment of money raised

ITA07/S293

If a VCT’s investment in a company is to be part of its qualifying holdings, two requirements regarding the employment of the money raised by the issue of the holding must be satisfied.

The first requirement is that the money raised by the issue has been employed wholly for the purpose of a trade carried on by a group company, or that the company intends that it shall be so employed.

The second requirement relates to the use of the money raised. For shares and securities issued on or after 22 April 2009 all of the money raised must be employed for the purpose of the qualifying activity within two years of the ‘trading time’ (that is, the date of issue of the holding or, where the money is raised for use in preparing to trade, the date when that trade starts to be carried on).

For shares and securities issued before 22 April 2009, the requirements were that at least 80% of the monies raised must be employed for the purpose of the qualifying activity within two years of the ‘trading time’ (see above) with the remainder used by the end of the following 12 months.

If not all of the money has been so employed ITA07/S286(5) will apply to divide the holding into two.

Employment of monies invested from funds raised on or after 6 April 2012

Where the money to be employed by the company comes from funds which the VCT raised on or after 6 April 2012, then the money is not to be regarded as being used for a qualifying activity if it is used to acquire shares in another company. This does not prevent the company from using the money to acquire shares in a qualifying 90% subsidiary, providing that that subsidiary then goes on to use the funds for a qualifying business activity within two years of the ‘trading time’ referred to above.