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HMRC internal manual

Venture Capital Schemes Manual

Share loss relief: individual and corporate claimants: individual claimants: type of company invested in: qualifying trading company: condition C: gross assets requirement

Condition C is one of the four conditions (A-D) which must be met by a company in order for it to be a qualifying trading company, and hence for its shares to be qualifying shares for Share Loss Relief purposes (assuming Enterprise Investment Scheme relief is not attributable to them). It limits the size of the company around the time the shares are issued by imposing two requirements: the gross assets requirement and the unquoted status requirement. For guidance on the unquoted status requirement, see VCM75110.

The gross assets requirement

The gross assets requirement is set out at ITA07/S142 and was previously at ICTA88/S293(6A) (which was applied for the purposes of Share Loss Relief by ICTA88/S576(4A)). It must be met both immediately before and immediately after the issue of the shares in respect of which Share Loss Relief is claimed.

Where the company in question is a single company without any qualifying subsidiaries rather than a parent of a group, the value of its gross assets must not exceed £7m immediately before the shares are issued and £8m immediately afterwards.

Where the company in question is a parent company the same limits apply to the value of the group assets. For this purpose, the ‘value of the group assets’ is the sum of the values of the gross assets of each of the members of the group, ignoring any assets which are rights over or shares in or securities of another member of the group.

How has the gross assets requirement changed over time?

The form of the gross assets requirement described above applies to shares issued on or after 6 April 2006. For shares issued before 6 April 2006, and shares subscribed for before 22 March 2006 but issued after 6 April, the limits were £15m (instead of £7m) and £16m (instead of £8m).

The gross assets requirement does not apply at all to shares issued before 6 April 1998.