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Income Tax Bill


Income Tax Bill
Part 6 — Venture capital trusts
Chapter 3 — VCT approvals

151

 

Withdrawal of approval

281     

Withdrawal of VCT approval of a company

(1)   

The Commissioners for Her Majesty’s Revenue and Customs (“the

Commissioners”) may withdraw the VCT approval of a company if at any time

it appears to them that there are reasonable grounds for believing—

5

(a)   

that the conditions for the approval of the company were not met at the

time of the approval,

(b)   

in a case where the Commissioners were satisfied for the purposes of

section 274(1)(b) or 275(2) that any of the conditions mentioned in

section 274(2) would be met in relation to any period, that the condition

10

is one which will not be, or has not been, met in relation to that period,

(c)   

in the case of a company approved under subsection (2) of section 275

(read with paragraph (b) of subsection (3) of that section), that the

company has not met such other conditions as may be prescribed by

regulations made by the Commissioners in relation to—

15

(i)   

the period of 3 years mentioned in that paragraph, or

(ii)   

any part of that period,

(d)   

in a case where the use of any money falls to be ignored for any

accounting period in accordance with section 280(2), that—

(i)   

the first accounting period of the company for which the use of

20

that money will not be ignored will be a period in relation to

which any of the conditions mentioned in section 274(2) will fail

to be met, or

(ii)   

the company has not met such other conditions as may be

prescribed by regulations made by the Commissioners in

25

relation to, or to any part of, an accounting period for which the

use of that money falls to be ignored, or

(e)   

that—

(i)   

the company’s most recent complete accounting period or its

current one is a period in relation to which there has been or will

30

be a failure of any of the conditions mentioned in section 274(2)

to be met, and

(ii)   

the failure was not or will not be one which, at the time of the

approval, was allowed for in relation to that period by virtue of

section 275(2).

35

(2)   

Subject to subsections (3) and (4), the withdrawal of the approval of a company

for the purposes of this Part has effect as from the time when notice of the

withdrawal is given to the company.

(3)   

If, in the case of a company approved as a VCT in the exercise of the power

conferred by section 275(2), the approval is withdrawn at a time before all of

40

the conditions mentioned in section 274(2) have been met with respect to the

company concerned—

(a)   

in relation to a complete accounting period of 12 months, or

(b)   

in relation to successive complete accounting periods constituting a

continuous period of at least 12 months,

45

   

the withdrawal of the approval has the effect that the approval is for all

purposes treated as never having been given.

(4)   

A notice withdrawing the approval of a company for the purposes of this Part

may specify a time falling before the time mentioned in subsection (2) as the

 
 

Income Tax Bill
Part 6 — Venture capital trusts
Chapter 3 — VCT approvals

152

 

time from which the withdrawal is to be treated as having effect for the

purposes of section 100 of TCGA 1992 (exemption for venture capital trusts

etc).

   

But the time so specified must be no earlier than the beginning of the

accounting period in relation to which it appears to the Commissioners that the

5

condition by reference to which the approval is withdrawn has not been, or

will not be, met.

(5)   

Despite any limitation on the time for making assessments, an assessment to

any tax chargeable in consequence of the withdrawal of any VCT approval

may be made at any time before the end of the period of 3 years beginning with

10

the time when the notice of withdrawal is given.

282     

Withdrawal of VCT approval in cases for which provision made under section

280(3)

(1)   

The Treasury may by regulations make provision for withdrawal of VCT

approval of a company to be treated—

15

(a)   

in a case where the withdrawal is by reference to a condition for

approval that would have been, or would be, met but for provision

made under section 280(3), and

(b)   

for the purposes of enactments specified by regulations,

   

as having taken effect as from a time specified in the notice of withdrawal that

20

is earlier than the time when the notice is given to the company.

(2)   

Provision made under subsection (1) has effect subject to the provisions of

section 281(4) (retrospective effect of notices of withdrawal of VCT approval)

as to the earliest time that may be specified by such a notice.

(3)   

Section 324 applies in relation to—

25

(a)   

regulations under subsection (1), and

(b)   

any power conferred by that subsection,

   

as it applies in relation to regulations under Chapter 5 and a power conferred

by any provision of that Chapter.

Supplementary

30

283     

Time as from which VCT approval has effect

(1)   

A VCT approval has effect as from the time specified in the approval.

(2)   

That time, if it falls before the time when the VCT approval is given, must be

no earlier than the time when the application was made.

(3)   

If the Commissioners for Her Majesty’s Revenue and Customs give a VCT

35

approval, they may stipulate that the approval is to have effect as from the time

when the application for the approval was made or any subsequent time.

284     

Power to make regulations as to procedure

Regulations under section 272 may make provision—

(a)   

as to the making of applications for VCT approvals and otherwise as to

40

the procedure to be followed in relation to any such applications and

the giving of such approvals,

 
 

Income Tax Bill
Part 6 — Venture capital trusts
Chapter 3 — VCT approvals

153

 

(b)   

as to the procedure to be followed in connection with the withdrawal

of VCT approvals,

(c)   

as to the obligations of a company which is a VCT if it should appear to

the company that the conditions for its VCT approval to continue in

force are no longer met,

5

(d)   

as to the accounts, records, returns and other information to be kept,

and provided or otherwise made available to the Commissioners for

Her Majesty’s Revenue and Customs, by companies which are or have

been VCTs and by persons who hold or have held shares in such

companies, and

10

(e)   

as to the persons liable to account for any tax becoming due where a

VCT approval is withdrawn.

285     

Interpretation of Chapter

(1)   

Chapter 4 has effect for interpreting references in this Chapter to a “qualifying

holding”.

15

(2)   

In this Chapter and the following Chapters of this Part “securities”, in relation

to a company, includes any liability of the company in respect of a loan

(whether secured or not), except that it does not include—

(a)   

any liability of the company in respect of a loan which has been made

to the company on terms which allow any person to require—

20

(i)   

the loan to be repaid, or

(ii)   

any stock or security relating to the loan to be re-purchased or

redeemed,

   

within the period of 5 years from the making of the loan or, as the case

may be, the issue of the stock or security, or

25

(b)   

any stock or security relating to a loan which has been made to the

company on terms which allow any person to require the loan to be

repaid, or the stock or security to be re-purchased or redeemed, within

that period.

   

But see sections 317(4) and 328(2).

30

(3)   

In this Chapter “eligible shares”, in relation to a company, means ordinary

shares in the company which carry—

(a)   

no present or future preferential right to dividends or to the company’s

assets on its winding up, and

(b)   

no present or future right to be redeemed.

35

(4)   

Any reference in this Chapter to a company’s investments is taken to include,

so far as it would not otherwise do so—

(a)   

money in the company’s possession, and

(b)   

any sum owed to the company by another person if the company has

account-holder’s rights over that sum.

40

(5)   

For the purposes of subsection (4)(b) a company has “account-holder’s rights”

over a sum owed to the company if—

(a)   

the company has a right (whether or not the exercise of the right is

subject to conditions) to require the other person to pay out the sum, or

amounts out of the sum, to the company or at the company’s direction,

45

and

(b)   

the sum is owed to the company—

 
 

Income Tax Bill
Part 6 — Venture capital trusts
Chapter 4 — Qualifying holdings

154

 

(i)   

as a result of amounts having been paid to the other person by

or for the company, or

(ii)   

as a result of the other person having identified a sum in respect

of which the company may exercise such a right.

(6)   

Subsection (5) does not have effect to cause a company’s investments to be

5

taken to include anything to which the company is not beneficially entitled, but

for this purpose a company is taken to be beneficially entitled to—

(a)   

sums subscribed for shares issued by it, and

(b)   

anything to which it is entitled that (directly or indirectly) represents

such sums.

10

Chapter 4

Qualifying holdings

Introduction

286     

Qualifying holdings: introduction

(1)   

If any shares in or securities of any company (“the relevant company”) are at

15

any time held by another company (“the investing company”), this Chapter

applies for determining whether and to what extent those shares or securities

(“the relevant holding”) are, for the purposes of Chapter 3, to be regarded as at

that time comprised in the investing company’s qualifying holdings.

(2)   

The relevant holding is to be regarded as comprised in the investing

20

company’s qualifying holding at any time if—

(a)   

all the following requirements of this Chapter are met at that time in

relation to the relevant company and the relevant holding, and

(b)   

the relevant holding consists of shares or securities which were first

issued by the relevant company to the investing company and have

25

been held by the investing company ever since.

(3)   

The requirements are those imposed as to—

(a)   

maximum qualifying investment (see section 287),

(b)   

no guaranteed loan (see section 288),

(c)   

proportion of eligible shares (see section 289),

30

(d)   

trading (see section 290),

(e)   

the carrying on of a qualifying activity (see section 291),

(f)   

use of the money raised (see section 293),

(g)   

the relevant company carrying on the relevant qualifying activity (see

section 294),

35

(h)   

unquoted status (see section 295),

(i)   

control and independence (see section 296),

(j)   

gross assets (see section 297),

(k)   

qualifying subsidiaries (see section 298), and

(l)   

property managing subsidiaries (see section 299).

40

(4)   

Subject to section 293(7), subsection (5) applies if—

(a)   

the requirements of section 287, 293 or 294 would be met as to only part

of the money raised by the issue of the relevant holding, and

 
 

Income Tax Bill
Part 6 — Venture capital trusts
Chapter 4 — Qualifying holdings

155

 

(b)   

that holding is not otherwise capable of being treated as comprising

separate holdings.

(5)   

If this subsection applies, this Chapter has effect in relation to the relevant

holding as if it were two separate holdings consisting of—

(a)   

a holding from which the part of the money mentioned in subsection

5

(4)(a) was raised, and

(b)   

a holding from which the remainder was raised.

   

Chapter 3 has effect as if the value of the relevant holding were to be

apportioned between the two holdings treated as subsisting by this subsection.

The requirements

10

287     

The maximum qualifying investment requirement

(1)   

The requirement of this section is that the relevant holding did not, when it was

issued, represent an investment in excess of the maximum qualifying

investment for the relevant period.

(2)   

Subject to subsection (7), the maximum qualifying investment for any period is

15

exceeded so far as the total amount of money which—

(a)   

is raised in that period, and

(b)   

is so raised by the issue to the investing company during that period of

shares in or securities of the relevant company,

   

exceeds £1 million.

20

(3)   

If the relevant holding represented, when issued, an investment in excess of the

maximum qualifying investment for the relevant period—

(a)   

the shares or securities which represented the excess are not to be

regarded as part of the relevant holding, and

(b)   

the amount of money raised by those shares or securities is to be

25

ignored for the purposes of any subsequent application of subsection

(2).

(4)   

For the purposes of this section, if there is any question as to whether any

shares in or securities of the relevant company which are for the time being

held by the investing company represent an investment in excess of the

30

maximum qualifying investment for any period, that question is determined

on the following assumption in relation to disposals by the investing company.

(5)   

The assumption is that, as between shares or securities of the same description,

those which represent the whole or any part of the excess are disposed of

before those which do not.

35

(6)   

Subsection (7) applies if—

(a)   

at the time of the issue of the relevant holding the relevant company or

any of its qualifying subsidiaries was a member of a partnership or a

party to a joint venture,

(b)   

the trade which meets the requirement of section 291 was at that time

40

being carried on, or to be carried on, by those partners in partnership or

by the parties to the joint venture, and

(c)   

the other partners or parties to the joint venture include at least one

other company.

 
 

Income Tax Bill
Part 6 — Venture capital trusts
Chapter 4 — Qualifying holdings

156

 

(7)   

If this subsection applies, this section has effect in relation to the relevant

company as if the sum of money for the time being specified in subsection (2)

were to be divided by 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 joint venture.

5

(8)   

For the purposes of this section “the relevant period” is the period beginning

with whichever is the earlier of—

(a)   

the time 6 months before the issue of the relevant holding, and

(b)   

the beginning of the tax year in which the issue of that holding took

place,

10

   

and (in either case) ending with the issue of that holding.

288     

The no guaranteed loan requirement

(1)   

The requirement of this section is that there are no securities relating to a

guaranteed loan in the relevant holding.

(2)   

For the purposes of this section, a security relates to a guaranteed loan if (and

15

only if) there are arrangements for the investing company to be or to become

entitled to receive anything (whether directly or indirectly) from a third party

in the event of the failure by any person to comply with—

(a)   

the terms of the loan to which the security relates, or

(b)   

the terms of the security.

20

(3)   

For the purposes of subsection (2) it does not matter whether the arrangements

apply in all cases of a failure to comply or only in some such cases.

(4)   

For the purposes of this section “third party” means any person except—

(a)   

the relevant company, and

(b)   

if the relevant company is a parent company that meets the trading

25

requirement in section 290(1)(b), the subsidiaries of that company.

289     

The proportion of eligible shares requirement

(1)   

The requirement of this section is that eligible shares represent at least 10% by

value of the totality of the shares in or securities of the relevant company

(including the relevant holding) which are held by the investing company.

30

(2)   

For the purposes of this section the value at any time of any shares in or

securities of a company is taken (subject to subsection (4)) to be their value

immediately after—

(a)   

any relevant event occurring at that time, or

(b)   

if no relevant event occurs at that time, the last relevant event to occur

35

before that time.

(3)   

In subsection (2) “the relevant event”, in relation to any shares in or securities

of the relevant company, means—

(a)   

the acquisition by the investing company of those shares or securities,

(b)   

the acquisition by the investing company of any other shares in or

40

securities of the relevant company which—

(i)   

are of the same description as those shares or securities, and

(ii)   

are acquired by the investing company otherwise than by being

allotted to the investing company without its being liable to

give any consideration, or

45

 
 

Income Tax Bill
Part 6 — Venture capital trusts
Chapter 4 — Qualifying holdings

157

 

(c)   

the making of any such payment in discharge, in whole or in part, of

any obligation attached to any shares in or securities of the relevant

company held by the investing company as (by discharging that

obligation) increases the value of any such shares or securities.

(4)   

If at any time the value of any shares or securities held by the investing

5

company is less than the consideration given by the investing company for

those shares or securities, it is to be assumed for the purposes of this section

that the value of the shares or securities at that time is equal to the amount of

that consideration.

(5)   

In this section “eligible shares” has the same meaning as in Chapter 3 (see

10

section 285(3)).

290     

The trading requirement

(1)   

The requirement of this section is that—

(a)   

the relevant company, ignoring any incidental purposes, exists wholly

for the purpose of carrying on one or more qualifying trades, or

15

(b)   

the relevant company is a parent company and the business of the

group does not consist wholly or as to a substantial part in the carrying

on of non-qualifying activities.

(2)   

If the relevant company intends that one or more other companies should

become its qualifying subsidiaries with a view to their carrying on one or more

20

qualifying trades—

(a)   

the relevant company is treated as a parent company for the purposes

of subsection (1)(b), and

(b)   

the reference in subsection (1)(b) to the group includes the relevant

company and any existing or future company that will be its qualifying

25

subsidiary after the intention in question is carried into effect.

   

This subsection does not apply at any time after the abandonment of that

intention.

(3)   

For the purposes of subsection (1)(b) the business of the group means what

would be the business of the group if the activities of the group companies

30

taken together were regarded as one business.

(4)   

For the purpose of determining the business of a group, activities are ignored

so far as they are carried on by a mainly trading subsidiary otherwise than for

its main purpose.

(5)   

For the purpose of determining the business of a group, activities of a group

35

company are ignored so far as they consist in—

(a)   

the holding of shares in or securities of a qualifying subsidiary of the

parent company,

(b)   

the making of loans to another group company, or

(c)   

the holding and managing of property used by a group company for

40

the purpose of one or more qualifying trades carried on by a group

company, or

(d)   

the holding and managing of property used by a group company for

the purpose of research and development from which it is intended—

(i)   

that a qualifying trade to be carried on by a group company will

45

be derived, or

 
 

 
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