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HMRC internal manual

Venture Capital Schemes Manual

VCT: VCT qualifying holdings: effect of conversion


In some cases part of the VCT’s holding may consist of ‘convertible’ shares or securities. Where the ‘conversion’ takes the form of the redemption or repayment of the existing shares or securities and the issue of new shares in exchange, the new shares may not satisfy all the requirements of ITA/Part 6 Chapter 4. However, where the ‘conversion’ takes place on or after 16 June 1999, and where certain conditions are satisfied, the new holding is nevertheless treated as qualifying to the extent that the old holding qualified.

The conditions in question are as follows:

  • The new shares have been issued to the VCT by virtue of the exercise of a right of conversion attached to other shares or securities previously held by it.
  • The new shares are in the same company as the original shares or securities were.
  • The original shares had been issued to the VCT and have been held by it ever since, and the right of conversion has never been varied.