VCTs—qualifying holdings: conditions relating to shares or securities, funds raised and arrangements
VCTs—qualifying holdings: conditions relating to shares or securities, funds raised and arrangements

The following Tax practice note provides comprehensive and up to date legal information covering:

  • VCTs—qualifying holdings: conditions relating to shares or securities, funds raised and arrangements
  • Qualifying holding conditions relating to the arrangements involving the investee company in general
  • Risk to capital condition
  • Company carrying on the qualifying activity condition
  • No disqualifying arrangements
  • Qualifying holding conditions relating to shares or securities held by VCT
  • Shares or securities
  • Issued to the VCT condition
  • No guaranteed loan condition
  • 10% eligible shares condition
  • More...

Like the enterprise investment scheme (EIS), the venture capital trust (VCT) regime is designed to encourage investment in smaller, higher-risk trading companies. A VCT is a company (not a trust), approved by HMRC, whose shares are admitted to trading in such a way that they meet the listing condition explained in Practice Note: VCTs—VCT conditions for HMRC approval—The listing condition. Individuals can benefit from a range of tax reliefs, and spread their investment risk, by subscribing for (or buying) shares in a VCT, which, in turn, subscribes for newly issued shares or debt in unquoted companies (companies listed on AIM or PLUS markets (other than the PLUS-listed market) are unquoted for these purposes).

For details of the tax reliefs available to individual investors in VCTs and the corporation tax reliefs available to VCTs themselves, see Practice Note: VCTs—introduction, tax reliefs and returns.

The VCT regime is prescriptive and sets out a number of requirements that must be met before these tax reliefs are available, including in relation to:

  1. the individual investor and their investment in VCT shares (see Practice Note: VCTs—introduction, tax reliefs and returns), and

  2. the VCT itself, which must be HMRC approved (see Practice Note: VCTs—VCT conditions for HMRC approval)

One of the key requirements for a VCT to obtain HMRC approval (and hence be a VCT attracting the various forms of tax relief) is

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