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HMRC internal manual

Venture Capital Schemes Manual

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Share Loss Relief: individual and corporate claimants: corporate claimants: eligibility of the claimant company

Whereas claims to Share Loss Relief under ITA 2007 are not limited to particular classes of individual, a claim under the corresponding provisions of CTA 2010 cannot be made by all companies. The claimant must meet certain eligibility conditions, and these are at CTA10/S69 (previously at ICTA88/S573(1) and S573(5)).

There are three conditions, badged A, B and C, that the claimant company must meet in order to eligible for Share Loss Relief.

Condition A: investment company

The first condition is that the claimant company must be an investment company on the date of the disposal of the shares. ‘Investment company’ is defined at CTA10/S90(1)as a company whose business consists wholly or mainly in the making of investments and which derived the principal part of its income from the making of investments. There are no statutory definitions of ‘wholly or mainly’ or ‘principal part’: you should allow these terms their normal meaning and apply them reasonably to the facts of each case. Similar phrases occur elsewhere in the Taxes Acts and the guidance relevant to those usages may be helpful (see, for instance, CTM60730 on the meaning of the term ‘wholly or mainly’ in the context of a close investment-holding company).

Condition B: period for which the claimant has been an investment company

The claimant company must also have been an investment company for a specified continuous period immediately preceding the disposal date. The period is either

  • six years or
  • a shorter continuous period provided that the company was neither a trading company nor an excluded company before the beginning of that shorter period.

‘Excluded company’ is defined at CTA10/S90(1). The definition is the same as is used for Share Loss Relief claimed by individuals, and there is guidance on this at VCM71020.

Condition C: relationship to the company invested in

The claimant company must not be associated with, or be a member of the same group as, the company whose shares it subscribed for and has disposed of. This must have been so at all times during the period between subscription for the shares and disposal of the shares.

Notice that the period during which this condition must be met is not the same as the period for which the claimant must have been an investment company (Condition B).

Two companies are associated with each other if one controls the other or if both are under the control of the same person or persons. The concept of ‘control’ is given statutory form by CTA10/S450 and S451 (and previously by ICTA88/S416). For guidance on the meaning of ‘control’, see CTM60210+.