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HMRC internal manual

Venture Capital Schemes Manual

VCT returns: Identifying investments funded by different issues of shares

Where applicable, a VCT return will need to specify the source of funding for particular investments.

This will be necessary when a VCT wishes to benefit from provisions which:

  • limit the application of restrictions to rules relating to qualifying holdings to cases where investments are made out of funds first raised after particular dates (see VCM58040), or
  • direct that the use of money directly or indirectly raised by a ‘further issue’ of shares is temporarily disregarded for the purpose of the 70% qualifying holdings condition (80% for accounting periods starting on or after 6 April 2019) and the 30% or 70% eligible shares condition (see VCM54170).

In the first case the VCT will need to be able to demonstrate that investments that fail to satisfy the more restrictive rule were acquired with money raised by an issue of shares that took place before a certain date (or acquired with funds that were ultimately derived from the investment of such money).

In the second case where the VCT is disregarding any investments or money it will need to demonstrate that the investments or money being disregarded have been directly or indirectly funded out of the money raised by the further issue (VCM58050).

Where it is not possible to identify shares individually, the VCT may assume that shares have been sold in the order that best enables the VCT to meet the approval conditions.