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HMRC internal manual

Venture Capital Schemes Manual

HM Revenue & Customs
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VCT: VCT qualifying holdings: employee numbers test


There is an upper limit on the number of employees the investee company may have at the time the shares are issued. That number must be fewer than 250 full-time employees, or their part - time equivalents. If the company is a member of a group, that figure is applied to the group as a whole.

This limit applies where the relevant holding was issued on or after 6 April 2012. Prior to that, the limit was fewer than 50 employees. That limit applied where the shares or securities were issued on or after 6 April 2007.

Holdings acquired out of funds raised by the VCT before 6 April 2007, or from monies derived from the investment of such funds, are not subject to any employee numbers restriction (FA07/Sch16 Para 3).

Who are employees?

Directors are counted as employees for the purpose of this test. But apprentices, students on vocational training, and employees on maternity or paternity leave at the time the shares are issued are not to be counted.

Full-time and part-time employees

The headcount limit is expressed in terms of ‘full-time equivalent’ employees.

HMRC regard a full-time employee as someone whose standard working week (excluding lunch breaks and overtime) is at least 35 hours. Any employee who worked longer than those hours would still only count as one full-time employee.

Where there are part-time employees their full-time equivalence can be calculated on any ‘just and reasonable’ basis. For example, someone working 21 hours a week would be expected to count as 60% of a full-time employee. Someone working ‘one week on, one week off’ would count as 50%, while the proportion of an employee working in term times only would depend on the length of those terms in relation to the year as a whole.

So companies (or groups) could have appreciably more than 250 employees at the time the shares were issued, but, if many of them are part-time, could still come under the limit.

Seasonal employees

The number of employees of some companies (or groups) may vary over the course of a year. In these situations there is no need to calculate some kind of average figure; the test is whether the limit of 250 full-time employees or their equivalents is met on the day the shares are issued.