Finance (No. 4) Bill

Session 2010 - 12
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Finance (No. 4) Bill

Finance (No. 4) Bill
Schedule 8 — Venture capital schemes
269

VCT approvals
2     (1)
Section 274 (requirements for the giving of approval) is amended as follows.
      (2)
In subsection (2), in the list of conditions, at the end insert—

“The investment limits condition
The company has not made and

will not make an investment, in the

5

relevant period, in a company

which breaches the permitted

investment limits”

      (3)
In subsection (3), omit the “and” at the end of paragraph (d), and after
paragraph (e) insert “, and
10
(f)
the investment limits condition by section 280B.”
3
After section 280A insert—
“280B
The investment limits condition
(1)
This section applies for the purposes of the investment limits
condition.
15
(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 if the total
annual investment in the relevant company exceeds the amount for
the time being specified in section 292A(1).
20
(3)
The total annual investment in the relevant company is the sum of—
(a)
the amount of the current investment, and
(b)
the total amount of other relevant investments made in the
relevant company (whether or not by the investor) in the year
ending with the day on which the current investment is
25
made.
(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
30
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),
35

in respect of the shares, 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
40
accordance with the principles laid down in the Community
Guidelines on Risk Capital Investments in Small and
Medium-sized Enterprises (as those guidelines may be
amended or replaced from time to time).

Finance (No. 4) Bill
Schedule 8 — Venture capital schemes
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(5)
For the purposes of subsections (2) and (3), an investment within
subsection (4)(b) is regarded as made when the shares are issued.”
Qualifying holdings: introduction
4
In section 286 (qualifying holdings: introduction), in subsection (3), omit the
“and” at the end of paragraph (k) and after paragraph (l) insert “, and
5
(m)
no disqualifying arrangements (see section 299A).”
Relaxation of maximum qualifying investment requirement
5     (1)
Section 287 (maximum qualifying investment requirement) is amended as
follows.
      (2)
In subsection (1), after “that” insert “, if the condition in subsection (1A) is
10
met,”.
      (3)
After that subsection insert—
“(1A)
The condition is that—
(a)
at the time of the issue of the relevant holding the relevant
company or any of its qualifying subsidiaries was a member
15
of a partnership or a party to a joint venture,
(b)
the trade which meets the requirement of section 291 was at
that time being carried on, or to be carried on, by those
partners in partnership or by the parties to the joint venture,
and
20
(c)
the other partners or parties to the joint venture include at
least one other company.”
      (4)
In subsection (2)—
(a)
for “Subject to subsection (7), the” substitute “The”, and
(b)
after “exceeds” insert “the relevant fraction of”.
25
      (5)
After that subsection insert—
“(2A)
The relevant fraction is—

where “N” is the number of companies (including the relevant
company) which, at the time when the relevant holding was issued
were members of the partnership or, as the case may be, parties to the
30
joint venture.”
      (6)
Omit subsections (6) and (7).
Increase in the maximum amount permitted to be raised annually
6     (1)
Section 292A (the maximum amount raised annually through risk capital
schemes requirement) is amended as follows.
35
      (2)
In subsection (1) for “£2 million” substitute “£5 million”.
      (3)
In subsection (3)—
(a)
in paragraph (b), omit sub-paragraph (ii), and

Finance (No. 4) Bill
Schedule 8 — Venture capital schemes
271

(b)
after that paragraph insert “, 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
5
European Union in accordance with the principles
laid down in the Community Guidelines on Risk
Capital Investments in Small and Medium-sized
Enterprises (as those guidelines may be amended or
replaced from time to time).”
10
      (4)
In subsection (5) omit “or paragraph 42 of Schedule 15 to FA 2000”.
Acquisition of shares
7
In section 293 (the use of the money raised requirement), after subsection (5)
insert—
“(5A)
Employing money on the acquisition of shares in a company does
15
not of itself amount to employing the money for the purposes of a
relevant qualifying activity.”
Increase in the gross assets limits
8
In section 297 (the gross assets requirement)—
(a)
in subsections (1)(a) and (2)(a), for “£7 million” substitute “£15
20
million”, and
(b)
in subsections (1)(b) and (2)(b), for “£8 million” substitute “£16
million”.
Relaxation of restriction on number of employees
9
In section 297A (the number of employees requirement), in subsections (1)
25
and (2), for “50” substitute “250”.
No disqualifying arrangements requirement
10
After section 299 insert—
“299A
The no disqualifying arrangements requirement
(1)
The relevant holding must not have been issued in consequence of,
30
or otherwise in connection with, disqualifying arrangements.
(2)
Arrangements are “disqualifying arrangements” if—
(a)
the main purpose, or one of the main purposes, of any person
(“P”) in being a party to them is to secure—
(i)
that the relevant company, or a qualifying 90%
35
subsidiary of that company, carries on a business
which consists of or includes the relevant qualifying
activity, and
(ii)
that shares or securities issued by the relevant
company may be comprised in any company’s
40
qualifying holdings or that one or more persons may
obtain relevant tax relief in respect of such shares

Finance (No. 4) Bill
Schedule 8 — Venture capital schemes
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which raise money for the purposes of that activity,
and
(b)
one or both of conditions A and B are met.
(3)
Condition A is that, as a (direct or indirect) result of the money raised
by the issue of the relevant holding being employed as required by
5
section 293(1)(b), an amount representing the whole or the majority
of the amount raised is paid to or for the benefit of a party to the
arrangements or a person connected with such a party,
(4)
Condition B is that, in the absence of the arrangements, it would have
been reasonable to expect that the component activities of the
10
relevant qualifying business activity would have been carried on as
part of another business by a person who is a party to the
arrangements or a person connected with such a party.
(5)
For the purposes of this section it is immaterial whether the relevant
company is a party to the arrangements.
15
(6)
In this section—
“component activities” means—
(a)
if the relevant qualifying activity is within section
291(2), the carrying on of a qualifying trade which
constitutes that activity, and
20
(b)
if the relevant qualifying activity is within section
291(3), the preparations to carry on a qualifying trade
which constitute that activity;
“arrangements” includes any scheme, agreement,
understanding, transaction or series of transactions (whether
25
or not legally enforceable);
“relevant qualifying activity” means the relevant qualifying
activity by reference to which the requirement in section
293(1)(b) (money raised to be employed within two years for
relevant qualifying activity) is met in relation to the relevant
30
holding;
“relevant tax relief”, in respect of shares, means one or more of
the following—
(a)
relief under Chapter 6 of Part 4 (losses on disposal of
shares) in respect of the shares;
35
(b)
EIS relief (within the meaning of Part 5) in respect of
the shares;
(c)
SEIS relief (within the meaning of Part 5A) in respect
of the shares;
(d)
relief under section 150A or 150E of TCGA 1992
40
(enterprise investment scheme and seed enterprise
investment scheme) in respect of the shares;
(e)
relief under Schedule 5B to that Act in consequence of
which deferral relief is attributable to the shares;
(f)
relief under Schedule 5BB to that Act (seed enterprise
45
investment scheme: re-investment) in consequence of
which SEIS re-investment relief is attributable to the
shares (see paragraph 4 of that Schedule).”

Finance (No. 4) Bill
Schedule 8 — Venture capital schemes
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Subsidised generation or export of electricity
11    (1)
Section 303 (meaning of “excluded activities”) is amended as follows.
      (2)
In subsection (1), omit “and” at the end of paragraph (k) and after that
paragraph insert—
“(ka)
the subsidised generation or export of electricity, and”.
5
      (3)
In subsection (2), omit the “and” at the end of paragraph (e) and after
paragraph (f) insert “, and
(g)
section 309A (subsidised generation or export of electricity).”
12
After section 309 insert—
“309A
Excluded activities: subsidised generation or export of electricity
10
(1)
This section supplements section 303(1)(ka).
(2)
Electricity is exported if it is exported onto a distribution system or
transmission system (within the meaning of section 4 of the
Electricity Act 1989).
(3)
The generation of electricity is “subsidised” if a person receives a FIT
15
subsidy in respect of the electricity generated.
(4)
The export of electricity is “subsidised” if a person receives a FIT
subsidy in respect of the electricity exported.
(5)
But the generation or export of electricity is not to be taken to fall
within section 303(1)(ka) if Condition A, B or C is met.
20
(6)
Condition A is that the generation or export is carried on by—
(a)
a community interest company,
(b)
a co-operative society,
(c)
a community benefit society, or
(d)
a NI industrial and provident society.
25
(7)
Condition B is that the plant used to generate the electricity relies
wholly or mainly on anaerobic digestion.
(8)
Condition C is that the electricity is hydroelectric power.
(9)
For the purposes of this section—
“anaerobic digestion” means the bacterial fermentation of
30
organic material in the absence of free oxygen (excluding
anaerobic digestion of sewage or material in a landfill);
“community benefit society” means—
(a)
a society registered under the Co-operative and
Community Benefit Societies and Credit Unions Act
35
1965 as a community benefit society, or
(b)
a pre-2010 Act society (as defined at section 4A(1) of
that Act) which meets the condition in section 1(3) of
that Act;
“co-operative society” means—
40
(a)
a society registered under the Co-operative and
Community Benefit Societies and Credit Unions Act
1965 as a co-operative society, or

Finance (No. 4) Bill
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(b)
a pre-2010 Act society (as defined at section 4A(1) of
that Act) which meets the condition in section 1(2) of
that Act;
“FIT subsidy” means—
(a)
a financial incentive under a scheme established by
5
virtue of section 41 of the Energy Act 2008 (powers to
amend licence conditions etc: feed-in tariffs) to
encourage small-scale low-carbon generation of
electricity, or
(b)
a financial incentive under a similar scheme
10
established in a territory outside the United Kingdom
to encourage small-scale low-carbon generation of
electricity;
“NI industrial and provident society” means a society
registered under the Industrial and Provident Societies Act
15
(Northern Ireland) 1969 (c. 24 (N.I.));
“small-scale low-carbon generation” has the meaning given by
section 41(4) of the Energy Act 2008.”
13
In section 310 (excluded activities: provision of services or facilities for
another business), in subsection (1)(a), for “(k)” substitute “(ka)”.
20
Powers to amend
14
In section 311 (power to amend Chapter by Treasury order), the existing
provision becomes subsection (1) and after that subsection insert—
“(2)
An order under this section may—
(a)
make different provision for different cases or purposes, or
25
(b)
include such transitional provision as the Treasury consider
appropriate.”
Information
15
After section 312 insert—
“312A
Power to require information relating to disqualifying arrangements
30
(1)
Subsection (2) applies if an officer of Revenue and Customs has
reason to believe that the relevant company has issued the relevant
holding to the investing company in consequence of or, or otherwise
in connection with, disqualifying arrangements (within the meaning
of section 299A(2)).
35
(2)
The officer may by notice require any person concerned to supply
the officer within such time as may be specified in the notice with—
(a)
a declaration in writing stating whether or not, according to
the information which that person has or can reasonably
obtain, such arrangements exist or have existed, and
40
(b)
such other information as the officer may reasonably require
for the purposes of section 299A and as that person has or can
reasonably obtain.
(3)
The period specified in a notice under subsection (2) must be at least
60 days.
45

Finance (No. 4) Bill
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(4)
A “person concerned” means—
(a)
the relevant company,
(b)
the investing company,
(c)
any person connected with either of those companies, and
(d)
any person whom the officer has reason to believe is or was a
5
party to the arrangements in question.”
16
In section 313 (interpretation of Chapter 4), in subsection (5), after “Chapter”
insert “(other than section 312A)”.
Consequential amendment
17
In section 98 of TMA 1970 (special returns, etc), in the first column of the
10
Table, before the entry for “regulations under Chapter 5 of Part 6 of ITA
2007” insert—
“section 312A of ITA 2007;”.
Commencement and transitional provision
18    (1)
The amendments made by paragraphs 2 and 3 have effect in relation to
15
investments made on or after 6 April 2012.
      (2)
But nothing in sub-paragraph (1) prevents investments made before that
date constituting a “relevant investment” for the purposes of section 280B of
ITA 2007 (as inserted by paragraph 3) for the purposes of determining
whether the investment limits condition in section 274 of that Act is
20
breached by an investment made on or after that date.
19    (1)
The amendments made by paragraphs 4, 5, 6(1) and (3), 10, 15 and 16 have
effect for the purpose of determining whether shares or securities issued on
or after 6 April 2012 are to be regarded as comprised in a company’s
qualifying holdings.
25
      (2)
But for the purposes of paragraphs 4, 10, 15 and 16 it does not matter
whether the disqualifying arrangements were entered into before or on or
after 6 April 2012.
20    (1)
The amendments made by paragraphs 6(2), 8 and 9 come into force on such
such day as the Treasury may by order appoint.
30
      (2)
Those amendments have effect in relation to shares issued on or after 6 April
2012.
21    (1)
Paragraph 7 is to be treated as having come into force on 6 April 2012.
      (2)
The amendments made by that paragraph do not have effect in relation to
an investment made by a VCT of protected money.
35
      (3)
“Protected money” means—
(a)
money raised by the issue before 6 April 2012 of shares in or
securities of the VCT, and
(b)
money derived from the investment of such money.
22    (1)
Subject to sub-paragraph (2), the amendments made by paragraphs 11 to 13
40
have effect in relation to a relevant holding issued on or after 23 March 2011.
      (2)
Those amendments do not have effect in relation to any relevant holding
issued before 6 April 2012 if the relevant company, or a qualifying 90%