Income Tax Act 2007

Giving of approval U.K.

274 Requirements for the giving of approval U.K.

(1) Subject to section 275, the Commissioners for Her Majesty's Revenue and Customs must not approve a company for the purposes of this Part unless it is shown to their satisfaction that the conditions mentioned in subsection (2)—

(a) are met in relation to the most recent complete accounting period of the company, and

(b) will be met in relation to the accounting period of the company which is current when the application for approval is made.

(2) The conditions applied by subsection (1) (which are also applied by section 275(1) and other provisions of this Chapter) are set out in column 2 of the following table together with, in column 1 of the table, the descriptions by which they are referred to. In each of those conditions “the relevant period” means the accounting period that is relevant for the purposes of the particular provision by which the condition is applied.

Description	Condition
The listing condition	The shares making up the company's ordinary share capital (or, if there are such shares of more than one class, those of each class) have been or will be [F1 [F2 admitted to trading on a regulated market] throughout the relevant period]
The nature of income condition	The company's income in the relevant period has been or will be derived wholly or mainly from shares or securities
The income retention condition	The company has not retained or will not retain an amount which is greater than 15% of the income it derived or will derive in the relevant period from shares or securities
The 15% holding limit condition	No holding in any company, other than a VCT or a company that would qualify as a VCT but for the listing condition, has represented or will represent at any time during the relevant period more than 15% by value of the company's investments
The 70% qualifying holdings condition	At least 70% by value of the company's investments has been or will be represented throughout the relevant period by shares or securities included in qualifying holdings of the company
The [F3 70%] eligible shares condition	At least [F3 70%] by value of the company's qualifying holdings has been or will be represented throughout the relevant period by holdings of eligible shares
[F4 The non-qualifying investments condition	The company has not made and will not make, in the relevant period, an investment which is neither of the following— (a) an investment that on the date it is made is included in the company's qualifying holdings; (b) an investment falling within subsection (3A)]
[F5 The investment limits condition	The company has not made and will not make an investment, in the relevant period, in a company which breaches the permitted investment limits]
[F6 The minimum investment on further issue condition	The company has not breached and will not breach, in the relevant period, the minimum investment on further issue condition]
[F7 The permitted maximum age condition	The company has not made and will not make an investment, in the relevant period, in a company which breaches the permitted maximum age limit.]
[F7 The no business acquisition condition	The company has not made and will not make an investment, in the relevant period, in a company which breaches the prohibition on business acquisitions.]

(3) The conditions mentioned in subsection (2) are supplemented as follows—

(a) the nature of income condition and the income retention condition by section 276,

(b) the 15% holding limit condition by section 277,

(c) the 15% holding limit condition, the 70% qualifying holdings condition and the [F8 70%] eligible shares condition by sections 278 and 279, F9 ...

(d) the 70% qualifying holdings condition and the [F10 70%] eligible shares condition by section 280[F11 , F12 ...

(e) the 70% qualifying holdings condition by section 280A], F13 ...

(f) the investment limits condition by [F14 subsection [F15 (3ZA)] and by] section 280B.

[F16 (fa) the minimum investment on further issue condition by section 280BA,]

[F17 (g) the permitted maximum age condition by subsection [F18 (3ZA)] and by section 280C, and

(h) the no business acquisition condition by subsection [F19 (3ZA)] and by section 280D.]

[F20 (3ZA) In the second column of the table in subsection (2), in the entries for the investment limits condition, the permitted maximum age condition and the no business acquisition condition, any reference to an investment made by the company in a company does not include an investment falling within subsection (3A).]

[F21 (3A) [F22 An investment made by a company (“the investor”) falls within this subsection if it is] any of the following investments—

(a) shares or units in an AIF (within the meaning given by regulation 3 of the Alternative Investment Fund Managers Regulations 2013) which may be repurchased or redeemed on 7 days' notice given by the investor;

(b) shares or units in a UCITS (within the meaning given by section 363A(4) of TIOPA 2010) which may be repurchased or redeemed on 7 days' notice given by the investor;

(c) ordinary shares or securities in a company which are acquired by [F23 the investor] on a regulated market.]

[F24 (d) money in the investor's possession;

(e) a sum owed to the investor which—

(i) under section 285(4)(b) (read with section 285(5) and (6)) is to be regarded as an investment of the investor, and

(ii) is such that the investor's right mentioned in section 285(5)(a) may be exercised on 7 days' notice given by the investor.]

[F25 (3B) In subsection (3A), any reference to a thing which may be done on 7 days' notice includes a case where that thing may be done—

(a) on less than 7 days' notice, or

(b) without notice.]

[F26 (4) In this section “regulated market” has the same meaning as in Directive [F27 Directive 2014/65/EU] of the European Parliament and of the Council on markets in financial instruments (see [F28 Article 4.1.21]).]

[F29 (5) The Treasury may by regulations—

(a) amend the first entry in the table in subsection (2) (the listing condition),

(b) add, remove or amend an entry in the list of investments in subsection (3A),

[F30 (ba) amend or repeal subsection (3B) in consequence of any provision made under paragraph (b),]

(c) amend this section so as to make provision to restrict the period for which an investment [F31 falling within subsection (3A) may be held by the company], or

(d) amend subsection (4).]

Textual Amendments

F1 Words in s. 274(2) substituted (19.7.2007) by Finance Act 2007 (c. 11), Sch. 26 para. 12(6)

F2 Words in s. 274(2) substituted (6.4.2011) (with effect in accordance with Sch. 2 paras. 7(2), 8 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 2 para. 2(2)(a); S.I. 2011/662, art. 2

F3 Word in s. 274(2) substituted (6.4.2011) (with effect in accordance with Sch. 2 paras. 6, 8 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 2 para. 2(2)(b); S.I. 2011/662, art. 2

F4 Words in s. 274(2) inserted (with effect in accordance with s. 31(8) of the amending Act) by Finance Act 2016 (c. 24), s. 31(2)

F5 Words in s. 274(2) inserted (17.7.2012) (with effect in accordance with Sch. 8 para. 18 of the amending Act) by Finance Act 2012 (c. 14), Sch. 8 para. 2(2)

F6 Words in s. 274(2) inserted (6.4.2018) by Finance Act 2018 (c. 3), Sch. 5 paras. 5(2), 13; S.I. 2018/931, reg. 4(c)

F7 Words in s. 274(2) inserted (with effect in accordance with Sch. 6 para. 23(1) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 3(2)

F8 Word in s. 274(3)(c) substituted (6.4.2011) (with effect in accordance with Sch. 2 paras. 6, 8 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 2 para. 2(2)(c); S.I. 2011/662, art. 2

F9 Word in s. 274(3)(c) repealed (19.7.2007) by Finance Act 2007 (c. 11), Sch. 27 Pt. 2(16)

F10 Word in s. 274(3)(d) substituted (6.4.2011) (with effect in accordance with Sch. 2 paras. 6, 8 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 2 para. 2(2)(c); S.I. 2011/662, art. 2

F11 S. 274(3)(e) and word inserted (with effect in accordance with Sch. 16 para. 20(5) of the amending Act) by Finance Act 2007 (c. 11), Sch. 16 para. 20(2)(4)

F12 Word in s. 274(3)(d) omitted (17.7.2012) (with effect in accordance with Sch. 8 para. 18 of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 8 para. 2(3)

F13 Word in s. 274(3)(e) omitted (with effect in accordance with Sch. 6 para. 23(1) of the amending Act) by virtue of Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 3(3)(a)

F14 Words in s. 274(3)(f) inserted (with effect in accordance with Sch. 6 para. 23(1) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 3(3)(b)

F15 Word in s. 274(3)(f) substituted (with effect in accordance with s. 31(8) of the amending Act) by Finance Act 2016 (c. 24), s. 31(3)

F16 S. 274(3)(fa) inserted (6.4.2018) by Finance Act 2018 (c. 3), Sch. 5 paras. 5(3), 13; S.I. 2018/931, reg. 4(c)

F17 S. 274(3)(g)(h) inserted (with effect in accordance with Sch. 6 para. 23(1) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 3(3)(c)

F18 Word in s. 274(3)(g) substituted (with effect in accordance with s. 31(8) of the amending Act) by Finance Act 2016 (c. 24), s. 31(3)

F19 Word in s. 274(3)(h) substituted (with effect in accordance with s. 31(8) of the amending Act) by Finance Act 2016 (c. 24), s. 31(3)

F20 S. 274(3ZA) inserted (with effect in accordance with s. 31(8) of the amending Act) by Finance Act 2016 (c. 24), s. 31(4)

F21 S. 274(3A) inserted (with effect in accordance with Sch. 6 para. 23(1) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 3(4)

F22 Words in s. 274(3A) substituted (with effect in accordance with s. 31(8) of the amending Act) by Finance Act 2016 (c. 24), s. 31(5)(a)

F23 Words in s. 274(3A)(c) substituted (with effect in accordance with s. 31(8) of the amending Act) by Finance Act 2016 (c. 24), s. 31(5)(b)

F24 S. 274(3A)(d)(e) inserted (with effect in accordance with s. 31(8) of the amending Act) by Finance Act 2016 (c. 24), s. 31(5)(c)

F25 S. 274(3B) inserted (with effect in accordance with s. 31(8) of the amending Act) by Finance Act 2016 (c. 24), s. 31(6)

F26 S. 274(4)(5) inserted (6.4.2011) (with effect in accordance with Sch. 2 paras. 7(2), 8 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 2 para. 2(2)(d); S.I. 2011/662, art. 2

F27 Words in s. 274(4) substituted (29.6.2017 for specified purposes, 3.7.2017 for specified purposes, 31.7.2017 for specified purposes, 3.1.2018 in so far as not already in force) by The Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 (S.I. 2017/701), reg. 1(2)(3)(4)(6), Sch. 4 para. 10(a) (with reg. 7)

F28 Words in s. 274(4) substituted (29.6.2017 for specified purposes, 3.7.2017 for specified purposes, 31.7.2017 for specified purposes, 3.1.2018 in so far as not already in force) by The Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 (S.I. 2017/701), reg. 1(2)(3)(4)(6), Sch. 4 para. 10(b) (with reg. 7)

F29 S. 274(5) substituted (with effect in accordance with Sch. 6 para. 23(1) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 3(5)

F30 S. 274(5)(ba) inserted (with effect in accordance with s. 31(8) of the amending Act) by Finance Act 2016 (c. 24), s. 31(7)(a)

F31 Words in s. 274(5)(c) substituted (with effect in accordance with s. 31(8) of the amending Act) by Finance Act 2016 (c. 24), s. 31(7)(b)

275 Alternative requirements for the giving of approval U.K.

(1) This section applies if one or more of the conditions mentioned in section 274(2) are not met with respect to a company in relation to its most recent complete accounting period.

(2) The Commissioners for Her Majesty's Revenue and Customs may still approve the company for the purposes of this Part if they are satisfied that the condition or conditions in question—

(a) will be met in relation to the period mentioned in subsection (3), and

(b) will continue to be met in relation to accounting periods following that period.

(3) The period is—

(a) in relation to the listing condition, the nature of income condition, the income retention condition and the 15% holding limit condition, the accounting period of the company which is current when the application for approval is made, or its next accounting period,

(b) in relation to the 70% qualifying holdings condition and the [F32 70%] eligible shares condition, an accounting period of the company beginning no more than 3 years after the time when the approval is given or, if earlier, when the approval takes effect.

Textual Amendments

F32 Word in s. 275(3)(b) substituted (6.4.2011) (with effect in accordance with Sch. 2 paras. 6, 8 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 2 para. 2(3); S.I. 2011/662, art. 2

276 Conditions relating to income U.K.

(1) Subsections (2) and (3) apply in determining for the purposes of the nature of income condition and the income retention condition—

(a) the amount of a company's income, or

(b) the amount of income which a company derives from shares or securities.

(2) The amounts to be brought into account under [F33 Part 5 of CTA 2009] in respect of the company's loan relationships are to be determined without reference to any debtor relationship of the company.

(3) The excess of any relevant credits over any relevant debits is to be treated as income which the company derives from shares or securities.

In this subsection “relevant credits” and “relevant debits” are credits and debits brought into account by virtue of [F34 section 574 of CTA 2009 (non-trading credits and debits to be brought into account under Part 5 of that Act)].

(4) The income retention condition does not apply as regards an accounting period if the amount which the company would be required to distribute in order to meet that condition is less than—

(a) £10,000, or

(b) if the period is shorter than 12 months, a proportionately reduced amount.

(5) The income retention condition does not apply as regards an accounting period if—

(a) the company is required to retain income in respect of the period by virtue of a restriction imposed by law, and

(b) the amount of income which the company is so required to retain in respect of the period exceeds an amount equal to 15% of the income the company derives from shares or securities.

(6) Subsection (5) does not apply if—

(a) the amount of income the company retains in respect of the accounting period exceeds the amount of income it is required, by virtue of a restriction imposed by law, to retain in respect of the period, and

(b) the sum of the excess and any amount of income the company distributes in respect of the period is at least—

(i) £10,000, or

(ii) if the period is shorter than 12 months, a proportionately reduced amount.

Textual Amendments

F33 Words in s. 276(2) substituted (retrospective to 1.4.2009) by The Corporation Tax Act 2009 (Amendment) Order 2009 (S.I. 2009/2860), arts. 1(2), 5

F34 Words in s. 276(3) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 701 (with Sch. 2 Pts. 1, 2)

277 The 15% holding limit condition U.K.

(1) If the 15% holding limit condition was met when a holding in a company was acquired or last added to, the condition is treated as continuing to be met until an addition is next made to it.

(2) “Holding in a company” means the shares or securities (whether of one class or more than one class) held in any one company.

(3) An addition is made to a holding in a company whenever the company whose holding it is—

(a) acquires further shares or securities in the company, but

(b) does not do so by being allotted shares or securities without becoming liable to give any consideration.

(4) For the purposes of this section—

(a) holdings in companies which—

(i) are members of a group, whether or not including the company whose holdings they are (“company A”), and

(ii) are not excluded from the 15% holding limit condition,

are to be treated as holdings in a single company, and

(b) if company A is a member of a group, money owed to it by another member of the group is to be treated—

(i) as a security of the latter held by company A, and

(ii) accordingly as, or as part of, the holding of company A in the company owing the money.

For the purposes of this subsection “group” means a company and all companies which are its 51% subsidiaries.

(5) Subsection (6) applies if, in connection with a scheme of reconstruction—

(a) a company issues shares or securities,

(b) the shares or securities are issued to persons holding shares or securities in a second company in respect of and in proportion to (or as nearly as may be in proportion to) their holdings in the second company, and

(c) those persons do not become liable to give any consideration for the shares or securities.

In this subsection “scheme of reconstruction” has the same meaning as in section 136 of TCGA 1992.

(6) For the purposes of this section—

(a) a holding of the shares or securities in the second company, and

(b) a corresponding holding of the shares or securities issued by the company,

are to be regarded as the same holding.

278 Conditions relating to value of investments: general U.K.

(1) This section and section 279 apply for the purposes of the 15% holding limit condition, the 70% qualifying holdings condition and the [F35 70%] eligible shares condition (“the relevant conditions”).

(2) The value of a holding of investments of any description is to be taken, unless subsection (3) applies, to be its value when acquired.

(3) If, in the case of a holding of investments of any description—

(a) the holding is added to by a further holding of investments of that description, or

(b) any payment is made in discharge, in whole or in part, of any obligation attached to the holding that (by discharging the whole or any part of the obligation) increases the value of the holding,

the value of the holding is to be taken to be its value immediately after the most recent addition or payment.

(4) For the purposes of this section an addition is made to a holding of investments of any description whenever the company whose holding it is—

(a) acquires further investments of that description, but

(b) does not do so by being allotted shares or securities in a company without becoming liable to give any consideration.

(5) Subsection (6) applies if, in connection with a scheme of reconstruction—

(a) a company issues shares or securities,

(b) the shares or securities are issued to persons holding shares or securities in a second company in respect of and in proportion to (or as nearly as may be in proportion to) their holdings in the second company, and

(c) those persons do not become liable to give any consideration for the shares or securities.

In this subsection “scheme of reconstruction” has the same meaning as in section 136 of TCGA 1992.

(6) For the purposes of this section—

(a) a holding of the shares or securities of any description in the second company, and

(b) a corresponding holding of the shares or securities issued by the company,

are to be regarded as the same holding.

Textual Amendments

F35 Word in s. 278(1) substituted (6.4.2011) (with effect in accordance with Sch. 2 paras. 6, 8 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 2 para. 2(4); S.I. 2011/662, art. 2

279 Conditions relating to value of investments: qualifying holdings U.K.

(1) If—

(a) any shares (“new shares”) are exchanged for other shares (“old shares”) under arrangements in relation to which section 326 (restructuring arrangements) applies, and

(b) those arrangements have not ceased by virtue of section 326(5) to be arrangements by reference to which requirements of Chapter 4 are treated as met,

the value of the new shares is taken to be the same as the value, when last valued in accordance with subsection (2) or (3) of section 278, of the old shares for which they are exchanged.

(2) In subsection (1)—

(a) references to shares in a company include references to any securities of that company, and

(b) the reference to the value of the new shares includes references to the value of those shares both—

(i) at the time of their acquisition, and

(ii) immediately after any subsequent addition to a holding of the new shares that is made under the arrangements.

(3) If—

(a) shares (“new shares”) are issued to a company as a result of the exercise by that company of any right of conversion attached to other shares, or securities, held by that company (“convertibles”), and

(b) section 329 (conversion of convertible shares and securities) applies in relation to the issue of the new shares,

the value of the new shares at the time of their acquisition is taken to be the same as the value, when last valued in accordance with subsection (2) or (3) of section 278, of the convertibles for which they are exchanged.

(4) Regulations under section 330 may make provision for securing that if—

(a) there is an exchange of shares to which regulations under section 330 apply, and

(b) the new shares are treated by virtue of the regulations as meeting the requirements of Chapter 4,

the value of the holding of the new shares, and of any original shares that are retained under the exchange, is taken to be an amount such that the requirements of the relevant conditions do not cease to be met because of the exchange.

(5) In subsection (4)—

(a) “shares” includes securities, and

(b) “exchange of shares”, “new shares” and “original shares” have the same meaning as in section 330.

280 Conditions relating to qualifying holdings and eligible shares U.K.

(1) Subsection (2) applies, subject to any regulations under subsection (3), if—

(a) there has been an issue of ordinary share capital of a company (“the first issue”),

(b) a VCT approval of that company has taken effect on or before the day of the making of the first issue, and

(c) a further issue of ordinary share capital of that company has been made since the making of the first issue.

(2) If this subsection applies, the use to which the money raised by the further issue is put, and the use of any money deriving from that use, are ignored in determining whether either or both of the 70% qualifying holdings condition and the [F36 70%] eligible shares condition are, have been or will be met in relation to—

(a) the accounting period in which the further issue is made, or

(b) any later accounting period ending no more than 3 years after the making of the further issue.

(3) The Treasury may by regulations make provision for subsection (2)—

(a) not to apply, or to be treated as not having applied, in specified cases, or

(b) to apply, or to be treated as having applied, in specified cases—

(i) only to a specified extent, or

(ii) only if specified conditions (including conditions requiring approvals to be obtained) are met.

(4) Provision made by regulations under subsection (3) may (but need not) be made so that, in any particular case, subsection (2)—

(a) does not apply, or is treated as not having applied, at prescribed times or with effect from a prescribed time, or

(b) applies, or is treated as having applied, in accordance with provision made under subsection (3)(b) at prescribed times or with effect from a prescribed time.

(5) In subsection (3) “specified” means specified by regulations and in subsection (4) “prescribed” means specified by, or determined under, regulations.

(6) Section 324 applies in relation to—

(a) regulations under subsection (3), and

(b) any power conferred by that subsection,

as it applies in relation to regulations under Chapter 5 and a power conferred by any provision of that Chapter.

Textual Amendments

F36 Word in s. 280(2) substituted (6.4.2011) (with effect in accordance with Sch. 2 paras. 6, 8 of the amending Act) by Finance (No. 3) Act 2010 (c. 33), Sch. 2 para. 2(5); S.I. 2011/662, art. 2

[F37 280A The 70% qualifying holdings condition: disposal of holding U.K.

(1) This section applies if—

(a) a company which is a VCT disposes of shares or securities (“the holding”),

(b) the consideration for the disposal does not consist wholly of new qualifying holdings, and

(c) the holding was comprised in the company's qualifying holdings throughout the 6 months ending immediately before the disposal.

(2) For the purpose of determining whether the 70% qualifying holdings condition is, has been or will be met—

(a) the company is to be treated as if it continued to hold the holding for the period of 6 months beginning with the disposal (but see subsection (4)), and

(b) the value of the company's investments in that period is to be treated as reduced by the amount of any monetary consideration for the disposal.

(3) The value of the holding in the period mentioned in subsection (2)(a) is to be treated as equal to its value (determined in accordance with this Chapter) immediately before the disposal.

(4) If the consideration for the disposal includes new qualifying holdings, subsection (2)(a) has effect as if the reference to the holding were to the appropriate proportion of the holding (the value of which is that proportion of the value of the holding, determined in accordance with subsection (3)).

(5) The appropriate proportion is—

where—

TC is the market value (at the time of the disposal) of the total consideration for the disposal, and

NQH is the market value (at that time) of the new qualifying holdings.

(6) If at any time the value of the company's investments would by virtue of subsection (2)(b) be reduced to an amount less than the value of its qualifying holdings, the value of its investments at that time is to be treated as equal to the value of its qualifying holdings.

(7) “New qualifying holdings” means shares or securities which (on transfer to the company) are comprised in the company's qualifying holdings.

(8) If (and to the extent that) the holding was acquired with money the use of which is at any time ignored by virtue of section 280(2), subsections (2) to (6) do not apply in relation to that time.

(9) Nothing in this section applies in relation to disposals between companies that are merging (within the meaning of section 323).]

Textual Amendments

F37 S. 280A inserted (with effect in accordance with Sch. 16 para. 20(5) of the amending Act) by Finance Act 2007 (c. 11), Sch. 16 para. 20(3), (4)

[F38 280B The investment limits condition U.K.

(1) This section applies for the purposes of the investment limits condition.

(2) Where a company (“the investor”) makes an investment (“the current investment”) in another company (“the relevant company”), that investment breaches the permitted investment limits [F39 if one or more of the following applies—

(a) the total annual investment in the relevant company exceeds the amount for the time being specified in section 292A(1);

(b) the total investment in the relevant company at the investment date exceeds the amount specified in—

(i) if the relevant company is a knowledge-intensive company (see section 331A) at the investment date, section 292AA(1)(a), and

(ii) in any other case, section 292AA(1)(b);

(c) condition A or B is met and the total investment in the relevant company at any time during the 5-year post-investment period exceeds the amount specified in—

(i) if the relevant company is a knowledge-intensive company at the investment date, section 292AB(4)(a), and

(ii) in any other case, section 292AB(4)(b).]

[F40 (2A) In this section—

• “the investment date” means the date the current investment is made;

• “the 5-year post-investment period” means the period of 5 years beginning with the day after the investment date.]

[F41 (3) For the purposes of subsection (2)(a), the total annual investment in the relevant company is the sum of—

(a) the amount of the current investment,

(b) the total amount of other relevant investments made (whether or not by the investor), in the year ending with the day on which the current investment is made, in—

(i) the relevant company, or

(ii) a company that has at any time in that year been a 51% subsidiary of the relevant company,

(including investments made in such a company before it became such a subsidiary but, if it is not such a subsidiary at the end of that year, not investments made in it after it last ceased to be such a subsidiary), and

(c) the total amount of any other relevant investments (whether or not made by the investor) which are relevant imported investments.

(3A) For the purposes of subsection (2)(b), the total investment in the relevant company at the investment date is the sum of—

(a) the amount of the current investment,

(b) the total amount of other relevant investments made (whether or not by the investor), on or before the investment date, in—

(i) the relevant company, or

(ii) a company that is at the investment date, or has at any time before that date been, a 51% subsidiary of the relevant company,

(including investments made in such a company before it became such a subsidiary but, if it is not such a subsidiary at the investment date, not investments made in it after it last ceased to be such a subsidiary), and

(c) the total amount of any other relevant investments (whether or not made by the investor) which are relevant imported investments.

(3B) For the purposes of subsection (2)(c)—

(a) condition A is that—

(i) a company becomes a 51% subsidiary of the relevant company during the 5-year post-investment period,

(ii) all or part of the money raised by the current investment is employed for the purposes of an activity which consists wholly or in part of a trade carried on by that company, and

(iii) that trade (or a part of it) was carried on by that company before it became a 51% subsidiary as mentioned in sub-paragraph (i);

(b) condition B is that all or part of the money raised by the current investment is employed for the purposes of an activity which consists wholly or in part of a trade which, during the 5-year post-investment period, becomes a relevant transferred trade (see subsection (3F).

(3C) For the purposes of subsection (2)(c), the total investment in the relevant company at a time during the 5-year post-investment period (“the relevant time”) is the sum of—

(a) the amount of the current investment,

(b) the total amount of other relevant investments made, before the relevant time (whether or not by the investor), in—

(i) the relevant company, or

(ii) a company that at the relevant time is, or before that time has been, a 51% subsidiary of the relevant company,

(including investments made in such a company before it became such a subsidiary but, if it is not such a subsidiary at the relevant time, not investments made in it after it last ceased to be such a subsidiary), and

(c) the total amount of any other relevant investments (whether or not made by the investor) which are relevant imported investments.

(3D) In this section “relevant imported investment” means—

(a) a relevant investment

(i) which is made in a company at a qualifying time, and

(ii) the money raised by which is employed for the purposes of a trade carried on by another company that is, at a qualifying time, a 51% subsidiary of the relevant company (but, if at the latest possible qualifying time it has ceased to be such a subsidiary, ignoring any money so employed after it last ceased to be such a subsidiary), or

(b) a relevant investment—

(i) which is made in a company at a qualifying time, and

(ii) the money raised by which is employed for the purposes of a trade carried on by that company or another person,

where, at a qualifying time but after that investment was made, that trade (or a part of it) became a relevant transferred trade (see subsection (3F)).

(3E) In subsection (3D) “a qualifying time” means—

(a) for the purposes of subsection (3), any time in the year mentioned in that subsection,

(b) for the purposes of subsection (3A), any time on or before the investment date,

(c) for the purposes of subsection (3C), any time before the relevant time.

(3F) For the purposes of this section if—

(a) a trade is transferred—

(i) to the relevant company,

(ii) to a company that is a 51% subsidiary of the relevant company, or

(iii) to a partnership of which a company within sub-paragraph (i) or (ii) is a member,

(including where it is transferred to a company within sub-paragraph (ii), or a partnership of which such a company is a member, before the company became such a subsidiary), and

(b) the trade, or a part of it, was previously (at any time) carried on by another person,

the trade or part mentioned in paragraph (b) becomes a “ relevant transferred trade ” at the time it is transferred as mentioned in paragraph (a).]

(4) A “relevant investment” is made in a company if—

(a) an investment (of any kind) in the company is made by a VCT,

(b) the company issues shares (money having been subscribed for them), and (at any time) the company provides—

(i) a compliance statement under section 205 (enterprise investment scheme), or

(ii) a compliance statement under section 257ED (seed enterprise investment scheme),

in respect of the shares,F42 ...

[F43 (ba) an investment is made in the company and (at any time) the company provides a compliance statement under section 257PB (tax relief for social investments) in respect of the investment, or]

(c) any other investment is made in the company which is aid received by it pursuant to a measure approved by the European Commission as compatible with Article 107 of the Treaty on the Functioning of the European Union in accordance with the principles laid down in the [F44 European Commission's Guidelines on State aid to promote risk finance investment] (as those guidelines may be amended or replaced from time to time).

(5) For the purposes of subsections (2) [F45 to (3E)], an investment within subsection (4)(b) is regarded as made when the shares are issued.]

[F46 (6) Section 257KB applies in determining for those purposes when an investment within subsection (4)(ba) is made as it applies for the purposes of Part 5B (tax relief on social investments).

(7) If only a proportion of the money raised by a relevant investment is employed for the purposes of a trade which became a relevant transferred trade as mentioned in subsection (3D), only the corresponding proportion of the relevant investment falls within that subsection.

(8) For the purposes of this section—

(a) references to a trade include a part of a trade (and references to the carrying on of a trade are to be construed accordingly), and

(b) when determining the amount of money raised by a relevant investment which has been employed for the purposes of a trade such apportionments are to be made as are just and reasonable.

(9) In this section “trade” includes—

(a) any business or profession,

(b) so far as not within paragraph (a), the carrying on of research and development activities from which it is intended a trade will be derived or will benefit, and

(c) preparing to carry on a trade.]

Textual Amendments

F38 S. 280B inserted (17.7.2012) (with effect in accordance with Sch. 8 para. 18 of the amending Act) by Finance Act 2012 (c. 14), Sch. 8 para. 3

F39 Words in s. 280B(2) substituted (with effect in accordance with Sch. 6 para. 23(1) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 4(2)

F40 S. 280B(2A) inserted (with effect in accordance with Sch. 6 para. 23(1) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 4(3)

F41 S. 280B(3)-(3F) substituted for s. 280B(3) (with effect in accordance with Sch. 6 para. 23(1) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 4(4)

F42 Word in s. 280B(4)(b) omitted (with effect in accordance with Sch. 6 para. 23(1) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 4(5)(a)

F43 S. 280B(4)(ba) inserted (with effect in accordance with Sch. 6 para. 23(1) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 4(5)(a)

F44 Words in s. 280B(4)(c) substituted (with effect in accordance with Sch. 6 para. 23(1) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 4(5)(b)

F45 Words in s. 280B(5) substituted (with effect in accordance with Sch. 6 para. 23(1) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 4(6)

F46 S. 280B(6)-(9) inserted (with effect in accordance with Sch. 6 para. 23(1) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 4(7)

[F47 280BA The minimum investment on further issue condition U.K.

(1) A company breaches the minimum investment on further issue condition where—

(a) there has been an issue of ordinary share capital of the company (“the first issue”),

(b) a VCT approval of the company has taken effect on or before the day of the making of the first issue,

(c) a further issue (“the further issue”) of ordinary share capital of the company has been made since the making of the first issue, and

(d) the company does not, on or before the relevant deadline, invest at least 30% of the money raised by the further issue in shares or securities which when held by the company are comprised in the company's qualifying holdings.

(2) The relevant deadline is the last day of the period of 12 months immediately following the end of the accounting period in which the further issue is made.]

Textual Amendments

F47 S. 280BA inserted (6.4.2018) by Finance Act 2018 (c. 3), Sch. 5 paras. 6, 13; S.I. 2018/931, reg. 4(c)

[F48 280C The permitted maximum age condition U.K.

(1) This section applies for the purposes of the permitted maximum age condition.

(2) Where a company makes an investment in another company (“the relevant company”), that investment (“the current investment”) breaches the permitted maximum age limits if—

(a) the investment is made after the initial investing period, and

(b) none of conditions A to C is met.

(3) “The initial investing period” means—

(a) where the relevant company is a knowledge-intensive company on the investment date, the period of 10 years [F49 beginning with—

(i) the relevant first commercial sale, or

(ii) if the relevant company so elects, the date by reference to which that company is treated as reaching an annual turnover of £200,000 (see section 331B),] and

(b) in any other case, the period of 7 years beginning with that sale.

(4) Condition A is that—

(a) a relevant investment was made in the relevant company before the end of the initial investing period, and

(b) some or all of the money raised by that investment was employed for the purposes of the same activities as the money raised by the current investment (or some of those activities).

(5) Condition B is that—

(a) the sum of—

(i) the amount of the current investment, and

(ii) the total amount of any other relevant investments made in the relevant company in a period of 30 consecutive days which includes the investment date,

is at least 50% of the average turnover amount, and

(b) the money raised by the current investment and the investments mentioned in paragraph (a)(ii) is employed for the purpose of entering a new product or geographical market.

(6) Condition C is that—

(a) condition B in subsection (5) or condition B in section 175A(4) (EIS: permitted company age requirement) was previously met in relation to one or more relevant investments made in the relevant company, and

(b) some or all of the money raised by those investments was employed for the purposes of the same activities as the money raised by the current investment.

(7) “The relevant first commercial sale” means the earliest of the following—

(a) the first commercial sale made by the relevant company,

(b) the first commercial sale made by a company that is at the investment date, or before that date has been, a 51% subsidiary of the relevant company (including a sale made by a company before it became such a subsidiary but, if it is not such a subsidiary at the investment date, not a sale made after it last ceased to be such a subsidiary),

(c) the first commercial sale made by any person who previously (at any time) carried on a trade which was subsequently carried on, on or before the investment date, by—

(i) the relevant company, or

(ii) a company that is at the investment date, or before that date has been, a 51% subsidiary of the relevant company,

(including a trade subsequently carried on by such a company before it became such a subsidiary but, if it is not such a subsidiary at the investment date, not a trade which it carried on only after it last ceased to be such a subsidiary);

(d) the first commercial sale made by a company which becomes a 51% subsidiary of the relevant company after the investment date in circumstances where all or part of the money raised by the current investment is employed for the purposes of an activity carried on by that subsidiary (including a sale made by such a company before it became such a subsidiary);

(e) the first commercial sale made by any person who previously (at any time) carried on a trade which was subsequently carried on by a company mentioned in paragraph (d) (including a trade carried on by such a company before it became such a subsidiary);

(f) if the money raised by the current investment or any part of it is employed for the purposes of a trade which has been transferred after the investment date to the relevant company or a 51% subsidiary of that company (or to a partnership of which the relevant company or such a subsidiary is a member), having previously been carried on (at any time) by another person, the first commercial sale made by that other person.

(8) “The average turnover amount” means one fifth of the total relevant turnover amount for the [F50 relevant five year period.]

[F51 (8A) Subject to subsection (8B), the relevant five year period is the five year period which ends immediately before the beginning of the last accounts filing period.

(8B) If the last accounts filing period ends more than 12 months before the investment date, the relevant five year period is the five year period which ends 12 months before the investment date.]

(9) In this section—

• “entering a new product or geographical market” has the same meaning as in Commission Regulation (EU) No 651/2014 (General block exemption Regulation);

• “first commercial sale” has the same meaning as in the European Commission's Guidelines on State aid to promote risk finance investments (as those guidelines may be amended or replaced from time to time);

• “the investment date” means the day on which the current investment is made;

• “the last accounts filing period” means the last period for filing (within the meaning of section 442 of the Companies Act 2006) for the relevant company which ends before the date on which the current investment is made;

• “relevant investment” has the meaning given by section 280B(4) (and section 280B(5) and (6) apply for the purposes of this section as they apply for section 280B(2) to (3E));

• “the total relevant turnover amount” for a period is—

  (a)

  if the relevant company is a single company at the investment date, the sum of—

  (i)

  the relevant company's turnover for that period,

  (ii)

  if all or part of the money raised by the current investment is employed for the purposes of an activity carried on by a company which becomes a 51% subsidiary of the relevant company after the investment date, the turnover for that period of that subsidiary (or, if there is more than one, each of them), and

  (iii)

  if all or part of the money raised by the current investment is employed for the purposes of a transferred trade, the turnover of that trade for so much of that period as falls before the trade became a transferred trade (except to the extent that it is already included in calculating the amounts within sub-paragraphs (i) and (ii));

  (b)

  if the relevant company is a parent company at the investment date, the sum of—

  (i)

  the relevant company's turnover for that period,

  (ii)

  the turnover for that period of each company which at the investment date is a 51% subsidiary of the relevant company,

  (iii)

  if all or part of the money raised by the issue of the current investment is employed for the purposes of an activity carried on by a company which becomes a 51% subsidiary of the relevant company after the investment date, the turnover for that period of that subsidiary (or, if there is more than one, each of them), and

  (iv)

  if all or part of the money raised by the current investment is employed for the purposes of a transferred trade, the turnover of that trade for so much of that period as falls before the trade became a transferred trade (except to the extent that it is already included in calculating the amounts within sub-paragraphs (i) to (iii));

• “transferred trade” means a trade which has been transferred to the company which is carrying on the trade at the time the money raised by the current investment is employed or to a partnership of which that company is a member;

• “turnover”—

  (a)

  in relation to a company, has the meaning given by section 474(1) of the Companies Act 2006 and is to be determined by reference to the accounts of companies and amounts recognised for accounting purposes (and such apportionments of those amounts as are just and reasonable are to be made for the purpose of determining a company's turnover for a period);

  (b)

  in relation to any other person carrying on a trade, also has the meaning given by section 474(1) of that Act (reading references in that provision to a company as references to the person) and is to be determined by reference to the accounts of the person and amounts recognised for accounting purposes (and such apportionments of those amounts as are just and reasonable are to be made for the purpose of determining a person's turnover for a period);

  (c)

  in relation to a transferred trade carried on by a company or other person, means such proportion of the turnover of the company or other person as it is just and reasonable to attribute to the transferred trade;

and section 280B(8) and (9) (meaning of “trade” etc) applies for the purposes of this section as it applies for the purposes of section 280B.

Textual Amendments

F48 Ss. 280C, 280D inserted (with effect in accordance with Sch. 6 para. 23(1) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 5

F49 Words in s. 280C(3)(a) substituted (6.4.2018) by Finance Act 2018 (c. 3), Sch. 4 paras. 7, 10; S.I. 2018/931, reg. 3(b)

F50 Words in s. 280C(8) substituted (retrospectively) by Finance Act 2016 (c. 24), s. 29(3)(a)(6) (with s. 30)

F51 S. 280C(8A)(8B) inserted (retrospectively) by Finance Act 2016 (c. 24), s. 29(3)(b)(6) (with s. 30)

280D The no business acquisition condition U.K.

(1) This section applies for the purposes of the no business acquisition condition.

(2) Where a company makes an investment in another company (“the relevant company”), that investment breaches the prohibition on business acquisitions if any of the money raised by it is employed (whether on its own or together with other money) on the acquisition, directly or indirectly, of—

(a) an interest in another company such that a company becomes a 51% subsidiary of the relevant company,

(b) a further interest in a company which is a 51% subsidiary of the relevant company,

(c) a trade,

(d) intangible assets employed for the purposes of a trade, or

(e) goodwill employed for the purposes of a trade.

(3) The Treasury may by regulations provide that subsection (2) does not apply in relation to acquisitions of intangible assets which are of a description specified, or which occur in circumstances specified, in the regulations.

(4) In this section—

• “goodwill” has the same meaning as in Part 8 of CTA 2009 (see section 715(3));

• “intangible assets” means any asset which falls to be treated as an intangible asset in accordance with generally accepted accountancy practice;

and section 280B(8) and (9) apply for the purposes of this section as they apply for the purposes of section 280B.]

Textual Amendments

F48 Ss. 280C, 280D inserted (with effect in accordance with Sch. 6 para. 23(1) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), Sch. 6 para. 5