Finance Bill (HC Bill 57)

trade such apportionments are to be made as are just and
reasonable.

(7) In this section “trade” includes—

(a) any business or profession,

(b) 5so 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.””

(6) In the heading, for “capital schemes” substitute “finance investments”.

8 10After section 173A insert—

“173AA Maximum risk finance investments at the issue date requirement

(1) The total amount of relevant investments made in the issuing
company on or before the issue date must not exceed—

(a) if the issuing company is a knowledge-intensive company at
15the issue date (see section 252A), £20 million, and

(b) in any other case, £12 million.

(2) In subsection (1) the reference to relevant investments made in the
issuing company includes—

(a) any relevant investment made in any company that at the
20issue date is, or has at any time before that date been, a 51%
subsidiary of the issuing company (including investments
made in such a company before it became such a subsidiary
but, if it is not such a subsidiary at the issue date, not
investments made in it after it last ceased to be such a
25subsidiary), and

(b) any other relevant investment made in a company if—

(i) the money raised by the investment has been
employed for the purposes of a trade carried on by
that company or another person, and

(ii) 30after the investment was made, but on or before the
issue date, that trade became a relevant transferred
trade (see subsection (4)).

(3) If only a proportion of the money raised by a relevant investment is
employed for the purposes of a trade which becomes a relevant
35transferred trade, the reference in subsection (2)(b) to the relevant
investment is to be read as a reference to the corresponding
proportion of that investment.

(4) Where—

(a) at any time on or before the issue date, a trade is
40transferred—

(i) to the issuing company,

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

(iii) 45to 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 but,
if the company is not such a subsidiary at the issue date, not
5where it is transferred to such a company or partnership after
the company last ceased to be 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
10transferred trade” at the time it is transferred as mentioned in
paragraph (a).

(5) In this section—

• “the issue date” means the date on which the relevant shares are
  issued;

• 15“relevant investment” has the meaning given by section
  173A(3), and section 173A(4) and (5) (which determines
  when certain investments are made) applies for the purposes
  of this section;

and section 173A(6) and (7) (meaning of “trade” etc) applies for the
20purposes of this section as it applies for the purposes of section 173A.

173AB Maximum risk finance investments during period B requirement

(1) The requirement of this section applies if condition A or B is met.

(2) Condition A is that—

(a) a company becomes a 51% subsidiary of the issuing company
25at any time during period B,

(b) all or part of the money raised by the issue of the relevant
shares is employed for the purposes of a qualifying business
activity which consists wholly or in part of a trade carried on
by that company, and

(c) 30that trade (or a part of it) was carried on by that company
before it became a 51% subsidiary as mentioned in paragraph
(a).

(3) Condition B is that all or part of the money raised by the issue of the
relevant shares is employed for the purposes of a qualifying business
35activity which consists wholly or in part of a trade which, during
period B, becomes a relevant transferred trade.

(4) The requirement of this section is that, at all times in period B, the
total of the relevant investments made in the issuing company before
the time in question (“the relevant time”) must not exceed—

(a) 40if the issuing company is a knowledge-intensive company at
the issue date (see section 252A), £20 million, and

(b) in any other case, £12 million.

(5) In subsection (4) the reference to relevant investments made in the
issuing company includes—

(a) 45any relevant investment made in any company that at any
time before the relevant time has been a 51% subsidiary of the
issuing company (including investments made in 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

(b) any other relevant investments made in a company where—

(i) the money raised by the investment has been
5employed for the purposes of a trade carried on by
that company or another person, and

(ii) after the investment was made, but before the
relevant time, that trade (or a part of it) becomes a
relevant transferred trade (see subsection (7)).

(6) 10If 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, the reference in subsection (5)(b) to the relevant
investment is to be read as a reference to the corresponding
proportion of that investment.

(7) 15Where—

(a) before the relevant time, a trade is transferred—

(i) to the issuing company,

(ii) to a company that is at the relevant time, or has before
that time been, a 51% subsidiary of the issuing
20company, 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
25member, before the company became such a subsidiary but,
if the company is not such a subsidiary at the relevant time,
not where it is transferred to such a company or partnership
after the company last ceased to be such a subsidiary), and

(b) the trade or a part of it was previously (at any time) carried
30on 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).

(8) In this section—

• 35“the issue date” means the date on which the relevant shares are
  issued, and

• “relevant investment” has the meaning given by section
  173A(3), and section 173A(4) and (5) (which determines
  when certain investments are made) applies for the purposes
  40of this section;

and section 173A(6) and (7) (meaning of “trade” etc) applies for the
purposes of this section as it applies for the purposes of section
173A.””

9 Omit section 173B (the spending of money raised by SEIS investment
45requirement).

10 (1) Section 174 (the purpose of the issue requirement) is amended as follows.

(2) The existing text becomes subsection (1).

(3) In that subsection, after “activity” insert “so as to promote business growth
and development”.

(4) After that subsection insert—

“(2) For this purpose “business growth and development” means the
5growth and development of—

(a) if the issuing company is a single company, the business of
that company, and

(b) if the issuing company is a parent company, what would be
the business of the group if the activities of the group
10companies taken together were regarded as one business.””

11 (1) Section 175 (the use of money raised requirement) is amended as follows.

(2) For subsection (1A) substitute—

“(1ZA) Employing money raised by the issue of the relevant shares (whether
on its own or together with other money) on the acquisition, directly
15or indirectly, of—

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

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

(c) 20a trade,

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

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

does not amount to employing that money for the purposes of a
qualifying business activity.

(1ZB) 25The Treasury may by regulations provide that subsection (1ZA) 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.

(1ZC) For the purposes of subsections (1ZA) and (1ZB)—

• 30“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;

35and section 173A(6) and (7) (meaning of “trade” etc) applies as it
applies for the purposes of section 173A.

(1A) Also, otherwise employing money on the acquisition of shares or
stock in a company does not of itself amount to employing the
money for the purposes of a qualifying business activity.””

12 40After section 175 insert—

“175A The permitted maximum age requirement

(1) The requirement of this section is that, if the relevant shares are
issued after the initial investing period, condition A or B must be
met.

(2) 45“The initial investing period” means—

(a) where the issuing company is a knowledge-intensive
company at the issue date, the period of 10 years beginning
with the relevant first commercial sale, and

(b) in any other case, the period of 7 years beginning with that
5sale.

(3) Condition A is that—

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

(b) some or all of the money raised by that investment was
10employed for the purposes of the relevant qualifying
business activity (or a part of it).

(4) Condition B is that the total amount of relevant investments made in
the issuing company in a period of 30 consecutive days which
includes the issue date is at least 50% of the average turnover
15amount.

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

(a) the first commercial sale made by the issuing company;

(b) the first commercial sale made by a company that is at the
20issue date, or before that date has been, a 51% subsidiary of
the issuing company (including a sale made by a company
before it became such a subsidiary but, if it is not such a
subsidiary at the issue date, not a sale made after it last ceased
to be such a subsidiary);

(c) 25the 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 issue date, by—

(i) the issuing company, or

(ii) a company that is at the issue date, or before that date
30has been, a 51% subsidiary of the issuing 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 issue date, not a trade which it
carried on only after it last ceased to be such a subsidiary);

(d) 35the first commercial sale made by a company which becomes
a 51% subsidiary of the issuing company after the issue date
in circumstances where all or part of the money raised by the
issue of the relevant shares is employed for the purposes of
an activity carried on by that subsidiary (including a sale
40made 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
45became such a subsidiary);

(f) if the money raised by the issue of the relevant shares (or any
part of it) is employed for the purposes of a trade which has
been transferred, after the issue date, to the issuing company
or a 51% subsidiary of that company (or a partnership of
50which the issuing company or such a subsidiary is a
member), having previously (at any time) been carried on by

another person, the first commercial sale made by that other
person.

(6) “The average turnover amount” means—

(a) if the issuing company is a single company at the issue date,
5one fifth of the total turnover of the company for the five year
period which ends—

(i) immediately before the beginning of the last accounts
filing period, or

(ii) if later, 12 months before the issue date, and

(b) 10if the issuing company is a parent company at the issue date,
one fifth of the total group turnover for that five year period.

(7) In this section—

• “first commercial sale” has the same meaning as in the
  European Commission’s Guidelines on State aid to promote
  15risk finance investments (as those guidelines may be
  amended or replaced from time to time);

• “the issue date” means the date on which the relevant shares are
  issued;

• “the last accounts filing period” means the last period for filing
  20(within the meaning of section 442 of the Companies Act
  2006) for the issuing company which ends before the date on
  which the relevant shares are issued;

• “relevant investment” has the meaning given by section
  173A(3), and section 173A(4) and (5) (which determines
  25when certain investments are made) applies for the purposes
  of this section;

• “relevant qualifying business activity” means the qualifying
  business activity for which the money raised by the issue of
  the relevant shares is employed;

• 30“the total group turnover” for a period is the sum of—

  (a)

  the issuing company’s turnover for that period, and

  (b)

  the turnover for that period of each company which at
  the issue date is a qualifying subsidiary of the issuing
  company;

• 35“turnover” 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
  40purpose of determining a company’s turnover for a period);

and section 173A(6) and (7) (meaning of “trade” etc) applies for the
purposes of this section as it applies for the purposes of section
173A.””

The issuing company

13 45In section 186A (the number of employees requirement)—

(a) in subsections (1) and (2) for “250” substitute “the permitted limit”,
and

(b) after subsection (3) insert—

“(3A) “The permitted limit” means—

(a) if the issuing company is a knowledge-intensive
company (see section 252A) at the time the relevant
5shares are issued, 500, and

(b) in any other case, 250.

(3B) The Treasury may by regulations amend subsection (3A)(a)
or (b) by substituting a different number for the number for
the time being specified there.””

14 10Omit section 200 (power to amend certain provisions of Chapter 4 of Part 5
of ITA 2007 by Treasury order).

Repayment etc of share capital

15 (1) Section 224 (repayments etc of share capital to other persons) is amended as
follows.

(2) 15In subsection (4), after paragraph (a) insert—

“(aa) causes any SEIS relief attributable to that person’s shares in
the issuing company to be withdrawn or reduced by virtue
of—

(i) section 257FA (disposal of shares), or

(ii) 20section 257FH(2)(a) (receipt of value by virtue of
repayment of share capital etc),”.”

(3) In subsection (5)—

(a) after “subsection (4)(a),” insert “(aa),” and

(b) after paragraph (a) insert—

“(aa) 25section 257FE,”.”

Powers to amend Part 5 of ITA 2007

16 After section 251 insert—

““Powers to amend

251A Powers to amend Chapters 2 to 4 by Treasury regulations

(1) 30The Treasury may by regulations add to, repeal or otherwise amend
any provision of—

(a) Chapter 2 (the requirements to be met in relation to the
investor),

(b) Chapter 3 (the general requirements to be met in respect of
35the relevant shares), or

(c) Chapter 4 (the requirements to be met by the issuing
company for it to be a qualifying company in relation to the
relevant shares).

(2) Regulations under this section may—

(a) 40make different provision for different cases or purposes;

(b) contain incidental, supplemental, consequential and
transitional provision and savings.

(3) The provision which may be made as a result of subsection (2)(b)
includes provision amending any provision of this or any other Act
(including an Act passed after this Act).

(4) This section is without prejudice to any other power to amend any
5provision of this Part.

(5) A statutory instrument containing regulations under this section
may not be made unless a draft of it has been laid before and
approved by a resolution of the House of Commons.””

“Knowledge-intensive companies”

17 10After section 252 insert—

“252A Meaning of “knowledge-intensive company”

(1) For the purposes of this Part, the issuing company is a “knowledge-
intensive company” at the time the relevant shares are issued if the
company meets—

(a) 15one or both of the operating costs conditions (see subsections
(2) and (3)), and

(b) one or both of—

(i) the innovation condition (see subsection (5)), and

(ii) the skilled employee condition (see subsection (8)).

(2) 20The first operating costs condition is that in at least one of the
relevant three preceding years at least 15% of the relevant operating
costs constituted expenditure on research and development or
innovation.

(3) The second operating costs condition is that in each of the relevant
25three preceding years at least 10% of the relevant operating costs
constituted such expenditure.

(4) In subsections (2) and (3)—

• “relevant operating costs” means—

  (a)

  if the issuing company is a single company at the time
  30the relevant shares are issued, the operating costs of
  that company, and

  (b)

  if the issuing company is a parent company at the
  time the relevant shares are issued, the sum of—

  (i)

  the operating costs of the issuing company,
  35and

  (ii)

  the operating costs of each company which is
  a qualifying subsidiary of the issuing
  company at that time;

• “the relevant three preceding years” means the three
  40consecutive years the last of which ends—

  (a)

  immediately before the beginning of the last accounts
  filing period, or

  (b)

  if later, 12 months before the date on which the
  relevant shares are issued.

(5) 45“The innovation condition” is—

(a) where the issuing company is a single company, that—

(i) the issuing company is engaged in intellectual
property creation at the time the relevant shares are
issued, and

(ii) it is reasonable to assume that, within 10 years of the
5issue of the relevant shares, one or a combination of—

(a) the exploitation of relevant intellectual
property held by the company, and

(b) business which results from new or improved
products, processes or services utilising
10relevant intellectual property held by the
company,

will form the greater part of its business;

(b) where the issuing company is a parent company, that—

(i) the parent company or one or more of its qualifying
15subsidiaries (or both that company and one or more
of those subsidiaries) is or are engaged in intellectual
property creation at the time the relevant shares are
issued, and

(ii) it is reasonable to assume that, within 10 years of the
20issue of the relevant shares, one or a combination of—

(a) the exploitation of relevant intellectual
property held by the parent company or any
of its qualifying subsidiaries, and

(b) business which results from new or improved
25products, processes or services utilising
relevant intellectual property held by the
parent company or any of its qualifying
subsidiaries,

will form the greater part of what would be the
30business of the group if the activities of the group
companies taken together are regarded as one
business.

(6) For the purposes of subsection (5), a company is engaged in
intellectual property creation if—

(a) 35relevant intellectual property is being created by the
company, or has been created by it within the previous three
years,

(b)
the company is taking, or preparing to take, steps in order
that relevant intellectual property will be created by it, or

(c) 40the company is carrying on activity which is the subject of a
written evaluation which—

(i) has been prepared by an independent expert, and

(ii) includes a statement to the effect that, in the opinion
of the expert, it is reasonable to assume that relevant
45intellectual property will, in the foreseeable future, be
created by the company.

(7) For the purposes of this section—

(a) intellectual property is “relevant” intellectual property, in
relation to a company, if the whole or greater part (in terms
50of value) of it is created by the company, and

(b) intellectual property is created by a company if it is created in
circumstances in which the right to exploit it vests in the
company (whether alone or jointly with others).

(8) “The skilled employee condition” is that throughout period B—

(a) 5if the issuing company is a single company, the FTE skilled
employee number is at least 20% of the FTE employee
number, and

(b) if the issuing company is a parent company, the FTE group
skilled employee number is at least 20% of the FTE group
10employee number.

(9) But, in subsection (8), the reference to period B does not include any
period during which the issuing company, by virtue of section 182
(companies in administration or receivership), is not regarded as
having ceased to meet the trading requirement.

(10) 15In this section—

• “FTE employee number” for a company is the full-time
  equivalent employee number determined in accordance with
  section 186A(3);

• “FTE group employee number” means the sum of—

  (a)

  20the FTE employee number for the issuing company,
  and

  (b)

  the FTE employee number for each of its qualifying
  subsidiaries;

• “FTE group skilled employee number” means the sum of—

  (a)

  25the FTE skilled employee number for the issuing
  company, and

  (b)

  the FTE skilled employee number for each of its
  qualifying subsidiaries;

• “FTE skilled employee number” for a company is determined in
  30accordance with section 186A(3) in the same way as the full-
  time equivalent employee number except that only
  employees of the company who—

  (a)

  hold a relevant HE qualification, and

  (b)

  are engaged directly in research and development or
  35innovation activities carried on—

  (i)

  if the issuing company is a single company, by
  that company, or

  (ii)

  if the issuing company is a parent company,
  by that company or any qualifying subsidiary
  40of that company,

  are to be taken into account;

• “independent expert”, in relation to an evaluation of activity of
  a company, means an individual who—

  (a)

  is not connected with the issuing company,

  (b)

  45holds a relevant HE qualification, and

  (c)

  is an expert in the area of research and development
  or innovation being or to be pursued by the company
  in question;

• “intellectual property” has the meaning given by section 195(6);

Finance BillPage 120

• “the last accounts filing period” means the last period for filing
  (within the meaning of section 442 of the Companies Act
  2006) for the issuing company which ends before the date on
  which the relevant shares were issued;

• 5“operating costs”, of a company for a period of account, means
  expenses of the company which are recognised as expenses in
  the company’s profit and loss account or income statement
  for that period, other than expenses relating to transactions
  between that company and another company at a time when
  10both companies are members of the same group (but see also
  subsection (11));

• “relevant HE qualification” means—

  (a)

  a qualification which is at level 7, or a higher level, of
  the framework for higher education qualifications in
  15England, Wales and Northern Ireland (as that
  framework may be amended or replaced from time to
  time),

  (b)

  a qualification which is at level 11, or a higher level, of
  the framework for qualifications of higher education
  20institutions in Scotland (as that framework may be
  amended or replaced from time to time), or

  (c)

  a comparable qualification to one within paragraph
  (a) or (b).

(11) Such apportionments as are just and reasonable are to be made to
25amounts recognised in a company’s profit and loss account or
income statement for the purpose of determining the company’s
operating costs for a year.

(12) When determining whether an individual is connected with the
issuing company for the purposes of this section, section 168 is to be
30ignored.

(13) The Treasury may by regulations amend this section for the
purposes of adding, amending or removing a condition which must
be met for a company to be a knowledge-intensive company.

(14) A statutory instrument containing regulations under subsection (13)
35may not be made unless a draft of it has been laid before and
approved by a resolution of the House of Commons.””

Consequential repeals

18 (1) In consequence of paragraphs 6(c) and 9, in Schedule 6 to FA 2012, omit
paragraphs 11 and 13.

(2) 40In consequence of paragraph 13, in Schedule 7 to FA 2012, omit paragraph
12.

(3) In consequence of paragraph 14, in Schedule 7 to FA 2012, omit paragraph
16.

Commencement and transitional provision

19 45The amendments made by paragraphs 6(c), 9 and 18(1) have effect in
relation to shares issued on or after 6 April 2015.

20 The amendments made by paragraph 15 have effect in relation to any
repayment, redemption or repurchase of share capital, or payment to a
member, on or after 6 April 2014.

21 (1) The amendments made by paragraphs 3 to 5, 6 (other than paragraph (c)), 7,
58, 10 to 12, 13 and 18(2) and (3) have effect in relation to shares issued on or
after the day on which this Act is passed.

(2) But nothing in sub-paragraph (1) prevents shares issued before that day
constituting “relevant investments” for the purposes of determining
whether the requirements of sections 173A, 173AA, 173AB and 175A are met
10in relation to shares issued on or after that day.

Section 26

SCHEDULE 6 Venture capital trusts

Introductory

1 Part 6 of ITA 2007 (venture capital trusts) is amended as follows.

15Limiting eligibility for relief to investments made before 2025

2 (1) Section 261 (eligibility for VCT relief) is amended as follows.

(2) In subsection (3), before paragraph (a) insert—

“(za) the shares are issued before 6 April 2025,”.”

(3) After subsection (4) insert—

“(5) 20The Treasury may, by regulations, amend subsection (3)(za) to
substitute a different date for the date for the time being specified
there.””

Requirements for the giving of VCT approval

3 (1) Section 274 (requirements for the giving of approval) is amended as follows.

(2) 25In the table in subsection (2), at the end insert—

(3) In subsection (3), omit the “and” at the end of paragraph (e) and after

paragraph (f) insert—

“(g) the permitted maximum age condition by section 280C, and

(h) the no business acquisition condition by section 280D.””

VCT approvals

4 (1) 5Section 280B (the investment limits condition) is amended as follows.

(2) In subsection (2) for the words from “if” to the end substitute “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) 10the 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) 15in any other case, section 292AA(1)(b);

(c) condition A or B applies 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
20company at the investment date, section 292AB(4)(a),
and

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

(3) After subsection (2) insert—

“(2A) In this section—

• 25“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.””

(4) For subsection (3) substitute—

“(3) 30For 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
35day 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
40became 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
45investments.

(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
5(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
10relevant 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) 15the 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) 20a 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
25carried 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
30current 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
35relevant 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) 40the 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
45became 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
50investments.

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

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

(b) the money raised by which is employed for the purposes of a
5trade 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) 10for 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
15relevant 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
20company, 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
25member, 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
30paragraph (a).””

(5) In subsection (4)—

(a) omit “or” at the end of paragraph (b) and after that paragraph
insert—

“(ba) an investment is made in the company and (at any
35time) the company provides a compliance statement
under section 257PB (tax relief for social investments)
in respect of the investment, or”, and”

(b) in paragraph (c) for “Community Guidelines on Risk Capital
Investments in Small and Medium-sized Enterprises” substitute
40“European Commission’s Guidelines on State aid to promote risk
finance investment”.

(6) In subsection (5) for “and (3)” substitute “to (3E)”.

(7) After subsection (5) insert—

“(6) Section 257KB applies in determining for those purposes when an
45investment 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) 5references 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
10trade such apportionments are to be made as are just and
reasonable.

(a)(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) 15when 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) 20any 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.””

25The first commercial sale condition and the no business acquisition condition

5 After section 280B insert—

“280C The permitted maximum age condition

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

(2) 30Where 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) neither condition A nor B is met.

(3) 35“The initial investing period” means—

(a) where the relevant company is a knowledge-intensive
company on the investment date, the period of 10 years
beginning with the relevant first commercial sale, and

(b) in any other case, the period of 7 years beginning with that
40sale.

(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
45employed 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 the sum of—

(a) the amount of the current investment, and

(b) 50the 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.

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

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

(b) 5the 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
10it 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) 15a 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
20such 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
25money 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
30(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
35it 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
40another person, the first commercial sale made by that other
person.

(7) “The average turnover amount” means—

(a) if the relevant company is a single company at the investment
date, one fifth of the total turnover of the company for the five
45year period which ends—

(i) immediately before the beginning of the last accounts
filing period, or

(ii) if later, 12 months before the investment date, and

(b) if the relevant company is a parent company at the
50investment date, one fifth of the total group turnover for that
five year period.

(8) In this section—

• “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
  5amended 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
  102006) 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));

• 15“the total group turnover” for a period is the sum of—

  (a)

  the relevant company’s turnover for that period, and

  (b)

  the turnover for that period of each company which at
  the time the relevant holding is issued is a 51%
  subsidiary of the relevant company;

• 20“turnover” 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
  25purpose of determining a company’s turnover for a period);

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.

280D The no business acquisition condition

(1) This section applies for the purposes of the no business acquisition
30condition.

(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
35acquisition, 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) 40a trade,

(d) intangible assets previously 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
45not 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—

Finance BillPage 128

• “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
  5accountancy practice;

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

Qualifying holdings

6 (1) Section 286 (qualifying holdings: introduction) is amended as follows.

(2) 10In subsection (2), omit the “and” at the end of paragraph (a) and after
paragraph (b) insert “, and