VCTs—qualifying holdings: investee companies
VCTs—qualifying holdings: investee companies

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

  • VCTs—qualifying holdings: investee companies
  • Qualifying holding conditions relating to investee company
  • UK establishment requirement
  • Financial health requirement
  • Trading requirement
  • Qualifying activity requirement
  • Permitted company age requirement
  • Investments made after the initial investing period
  • Relevant investments
  • Average turnover
  • More...

VCTs—qualifying holdings: investee companies

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 (excluding PLUS-listed) are unquoted for these purposes).

For further 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

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