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HMRC internal manual

Venture Capital Schemes Manual

From
HM Revenue & Customs
Updated
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CVS: investors and reliefs: no control conditions

FA00/SCH15/PARA8

A qualifying investing company must not control the company invested in at any time during the qualification period.

‘Control’ is defined for this purpose as in ICTA88/S416(2) to (6), (see CTM60200 onwards), subject to two modifications:

  • the rights of any person in respect of ‘relevant preference shares’ (see VCM91110) are ignored,
  • the rights of any ‘loan creditor’ (see CTM60130) are ignored - but where the investing company has a loan or holding of loan stock which is convertible into shares, the effect of the entitlement to convert must be taken into account.

Thus in this context the particular tests for control set out in ICTA88/S416 (2) cover the company’s possession of, or entitlement to acquire:

  • the greater part of the issuing company’s issued share capital, excluding any which consists of relevant preference shares,
  • the greater part of the voting power in that company,
  • such part of that company’s issued share capital as would entitle the investing company to receive the greater part of its income if it were all distributed, ignoring for this purpose any entitlement in respect of relevant shares and the income which would be distributed in respect of those shares,
  • such part of that company’s issued share capital as would entitle the investing company to receive the greater part of its assets on a winding up, ignoring for this purpose any rights in respect of relevant preference shares and the assets which would be distributed in respect of those shares.

For the purpose of this requirement there are to be attributed to the investing company:

  • any rights or powers held by any person ‘connected’ with it (see VCM91070),
  • any rights or powers held by any of its directors (or by any spouse, civil partner, parent or child of such a director), or by any director (or spouse, civil partner etc) of any company connected with it.