Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Venture Capital Schemes Manual

From
HM Revenue & Customs
Updated
, see all updates

VCT: VCT qualifying holdings: effect of reorganisation

ITA07/S330, SI2661/2002 Regulations

A company in which a VCT has invested may undergo a reconstruction or reorganisation, or be taken over by another company. This can result in the VCT coming to hold different shares or securities in the same company, or shares or securities in a different company, which would not, were it not for these Regulations, be qualifying holdings because they do not satisfy certain requirements of ITA/Part 6 Chapter 4.

The provisions of ITA/S330 were introduced by FA2000 and contain a power to make regulations to address this kind of situation. Those Regulations, in the form of SI2661/2002, came into force in November 2002, but they have effect for such reconstructions, reorganisations and take-overs taking place on or after 21 March 2000, when it was announced that these Regulations would be made.

The effect of the Regulations is that that the requirements of certain paragraphs of ITA/Part 6 Chapter 4B are deemed to be satisfied after the reorganisation etc, and, providing the requirements of other paragraphs of Chapter 4are met, the new holding may be treated as a qualifying holding of the VCT. In cases where those other paragraphs of Chapter 4are not met, the new holding may be treated as a qualifying company for a certain period, thereby giving the VCT time to arrange the disposal of the holding if it wishes.

The Regulations cover the situations where:

  • There is an exchange of shares or securities for shares or securities in the same company - see VCM55320.
  • There is an exchange of shares or securities for shares in another company - see VCM55330.
  • There is a scheme of reconstruction involving an issue of shares or securities - see VCM55340.

Note that these Regulations are in addition to, and do not replace, the existing provisions at ITA07/S326 which cover the situation where a new holding company is formed - see VCM55290.