Session 2012 - 13
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Finance 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.

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(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).

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(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

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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),

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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).

 
 

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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

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(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—

1

N

   

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 Bill
Schedule 8 — Venture capital schemes

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(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

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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

 
 

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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).”

 
 

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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.

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(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

 
 

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Schedule 8 — Venture capital schemes

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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)).

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(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

 
 

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Schedule 8 — Venture capital schemes

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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%

 
 

 
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Revised 9 May 2012