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Finance Bill
Schedule 16 — Venture capital schemes etc
Part 1 — Limit on number of employees of company in which investment is made

202

 

Venture capital trusts

3     (1)  

Part 6 of ITA 2007 is amended as follows.

      (2)  

In section 286(3) (qualifying holdings: introduction) after paragraph (j)

insert—

“(ja)   

number of employees (see section 297A),”.

5

      (3)  

After section 297 insert—

“297A   

 The number of employees requirement

(1)   

If the relevant company is a single company, the full-time equivalent

employee number for it must be less than 50 when the relevant

holding is issued.

10

(2)   

If the relevant company is a parent company, the sum of—

(a)   

the full-time equivalent employee number for it, and

(b)   

the full-time equivalent employee numbers for each of its

qualifying subsidiaries,

   

must be less than 50 when the relevant holding is issued.

15

(3)   

The full-time equivalent employee number for a company is

calculated as follows—

   

Step 1

   

Find the number of full-time employees of the company.

   

Step 2

20

   

Add, for each employee of the company who is not a full-time

employee, such fraction as is just and reasonable.

   

The result is the full-time equivalent employee number.

(4)   

In this section references to an employee—

(a)   

include a director, but

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(b)   

do not include—

(i)   

an employee on maternity or paternity leave, or

(ii)   

a student on vocational training.”

      (4)  

In section 327 (certain requirements of Chapter 4 to be treated as met)—

(a)   

in subsection (1), at the end insert “, and

30

section 297A (the number of employees requirement).”;

(b)   

in subsection (4)(b) for “and 297” substitute “, 297 and 297A”.

      (5)  

This paragraph is deemed to have come into force on 6th April 2007.

      (6)  

The amendments made by this paragraph do not have effect in relation to—

(a)   

a relevant holding issued before that date, or

35

(b)   

a relevant holding acquired by a company (“the investing company”)

by means of the investment of protected money.

      (7)  

For the purposes of sub-paragraph (6)(b), “protected money” is—

(a)   

money raised by the issue before 6th April 2007 of shares in or

securities of the investing company, or

40

(b)   

money derived from the investment of such money.

 

 

Finance Bill
Schedule 16 — Venture capital schemes etc
Part 2 — Limit on amount raised annually by company through risk capital schemes

203

 

Part 2

Limit on amount raised annually by company through risk capital schemes

Corporate venturing scheme

4     (1)  

Schedule 15 to FA 2000 is amended as follows.

      (2)  

In paragraph 34 (introduction to Part) after sub-paragraph (a) insert—

5

“(aa)   

the maximum amount raised annually through risk capital

schemes (see paragraph 35A);”.

      (3)  

After paragraph 35 insert—

“Requirement as to maximum amount raised annually through risk capital schemes

35A   (1)  

The total amount of relevant investments made in the issuing

10

company in the year ending with the date the relevant shares are

issued must not exceed £2 million.

      (2)  

In sub-paragraph (1), the reference to relevant investments made

in the issuing company includes relevant investments made in any

company that is, or has at any time in the year mentioned there

15

been, a subsidiary of the issuing company (whether or not it was

such a subsidiary when the investment was made).

      (3)  

A “relevant investment” is made in a company if—

(a)   

an investment (of any kind) in the company is made by a

VCT, or

20

(b)   

the company issues shares (money having been subscribed

for them), and (at any time) the company provides—

(i)   

a compliance statement under paragraph 42, or

(ii)   

a compliance statement under section 205 of ITA

2007 (enterprise investment scheme),

25

   

in respect of the shares.

      (4)  

An investment within sub-paragraph (3)(b) is regarded as made

when the shares are issued.”

      (4)  

In paragraph 63(1)(a) (withdrawal of relief: interest), after sub-paragraph (i)

insert—

30

“(ia)   

paragraph 35A (maximum amount raised annually

through risk capital schemes);”.

Enterprise investment scheme

5     (1)  

Part 5 of ITA 2007 is amended as follows.

      (2)  

In section 172 (overview of Chapter), after paragraph (a) insert—

35

“(aa)   

the maximum amount raised annually through risk capital

schemes (see section 173A),”.

 

 

Finance Bill
Schedule 16 — Venture capital schemes etc
Part 2 — Limit on amount raised annually by company through risk capital schemes

204

 

      (3)  

After section 173 insert—

“173A   

The maximum amount raised annually through risk capital schemes

requirement

(1)   

The total amount of relevant investments made in the issuing

company in the year ending with the date the relevant shares are

5

issued must not exceed £2 million.

(2)   

In subsection (1), the reference to relevant investments made in the

issuing company includes relevant investments made in any

company that is, or has at any time in the year mentioned there been,

a subsidiary of the issuing company (whether or not it was such a

10

subsidiary when the investment was made).

(3)   

A “relevant investment” is made in a company if—

(a)   

an investment (of any kind) in the company is made by a

VCT, or

(b)   

the company issues shares (money having been subscribed

15

for them), and (at any time) the company provides—

(i)   

a compliance statement under section 205, or

(ii)   

a compliance statement under paragraph 42 of

Schedule 15 to FA 2000 (corporate venturing scheme),

   

in respect of the shares.

20

(4)   

An investment within subsection (3)(b) is regarded as made when

the shares are issued.”

      (4)  

In section 239(1) (withdrawal etc of relief: date from which interest is

chargeable), in column 1 of the Table, after “163,” insert “173A”.

      (5)  

The amendments made by this paragraph do not have effect in relation to

25

shares issued to the managers of an approved fund which closed before the

day on which this Act is passed.

      (6)  

Paragraph 2(5) (meaning of “the managers of an approved fund” etc) applies

for the purposes of sub-paragraph (5).

Venture capital trusts

30

6     (1)  

Chapter 4 of Part 6 of ITA 2007 (qualifying holdings) is amended as follows.

      (2)  

In section 286(3) (introduction) after paragraph (e) insert—

“(ea)   

the maximum amount raised annually through risk capital

schemes (see section 292A),”.

      (3)  

After section 292 insert—

35

“292A   

 The maximum amount raised annually through risk capital schemes

requirement

(1)   

The total amount of relevant investments made in the relevant

company in the year ending with the date the relevant holding is

issued must not exceed £2 million.

40

(2)   

In subsection (1), the reference to relevant investments made in the

relevant company includes relevant investments made in any

company that is, or has at any time in the year mentioned there been,

 

 

Finance Bill
Schedule 16 — Venture capital schemes etc
Part 2 — Limit on amount raised annually by company through risk capital schemes

205

 

a subsidiary of the relevant company (whether or not it was such a

subsidiary when the investment was made).

(3)   

A “relevant investment” is made in a company if—

(a)   

an investment (of any kind) in the company is made by a

VCT, or

5

(b)   

the company issues shares (money having been subscribed

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 paragraph 42 of

10

Schedule 15 to FA 2000 (corporate venturing scheme),

   

in respect of the shares.

(4)   

For the purposes of subsections (1) and (2), an investment within

subsection (3)(b) is regarded as made when the shares are issued.

(5)   

Subsection (6) applies if, by virtue of the provision of a compliance

15

statement under section 205 above or paragraph 42 of Schedule 15 to

FA 2000, the requirement of this section is not met.

(6)   

The requirement is to be treated as having been met throughout the

period—

(a)   

beginning with the time the relevant holding was issued, and

20

(b)   

ending with the time the compliance statement was

provided.”

      (4)  

This paragraph is deemed to have come into force on 6th April 2007.

      (5)  

The amendments made by this paragraph do not have effect in relation to an

investment made by a VCT of protected money.

25

      (6)  

“Protected money” means—

(a)   

money raised by the issue on or before 5th April 2007 of shares in or

securities of the VCT, and

(b)   

money derived from the investment of such money.

Enterprise investment scheme: reinvestment

30

7     (1)  

Schedule 5B to TCGA 1992 is amended as follows.

      (2)  

In paragraph 1 (application of Schedule)—

(a)   

in sub-paragraph (2), after paragraph (d) insert—

“(da)   

the total amount of relevant investments made in

the company in the year ending with the date the

35

shares are issued does not exceed £2 million,”, and

(b)   

after sub-paragraph (5) insert—

    “(6)  

Section 173A(3) and (4) of ITA 2007 (meaning of “relevant

investment”) apply for the purposes of sub-paragraph

(2)(da).

40

      (7)  

In sub-paragraph (2)(da), the reference to relevant

investments made in the company includes relevant

investments made in a company that is, or has at any time

in the year mentioned there been, a subsidiary of the

 

 

Finance Bill
Schedule 16 — Venture capital schemes etc
Part 3 — Excluded activities: receipt of royalties and licence fees

206

 

company (whether or not it was such a subsidiary when

the investment was made).”

      (3)  

In paragraph 1A(1) (failure of conditions of application), after “(2)(b)” insert

“or (2)(da)”.

Transitional provision

5

8     (1)  

This paragraph applies for the purposes of—

(a)   

paragraph 35A of Schedule 15 to FA 2000,

(b)   

section 173A of ITA 2007 (including that section as applied by

paragraph 1(6) of Schedule 5B to TCGA 1992), and

(c)   

section 292A of ITA 2007.

10

      (2)  

References to investments made by a VCT do not include—

(a)   

investments made on or before 5th April 2007,

(b)   

investments of protected money (as defined by paragraph 6(6)).

      (3)  

References to shares in respect of which compliance statements are provided

do not include—

15

(a)   

shares issued before the day on which this Act is passed, or

(b)   

shares issued to the managers of an approved fund which closed

before that day.

      (4)  

Paragraph 2(5) (meaning of “the managers of an approved fund” etc) applies

for the purposes of sub-paragraph (3)(b) above.

20

Part 3

Excluded activities: receipt of royalties and licence fees

Corporate venturing scheme

9     (1)  

Paragraph 29 of Schedule 15 to FA 2000 is amended as follows.

      (2)  

In sub-paragraph (3), for paragraphs (a) and (b) substitute—

25

“(a)   

by the issuing company, or

(b)   

by a company which was a qualifying subsidiary of the

issuing company throughout a period during which it

created the whole or greater part (in terms of value) of the

intangible asset.”

30

      (3)  

After sub-paragraph (6) insert—

    “(7)  

If—

(a)   

the issuing company acquired all the shares (“old shares”)

in another company (“the old company”) at a time when

the only shares issued in the issuing company were

35

subscriber shares, and

(b)   

the consideration for the old shares consisted wholly of the

issue of shares in the issuing company,

           

references in sub-paragraph (3) to the issuing company include

the old company.”

40

10         

In paragraph 86(2) (substitution of new shares for old shares), after

“Schedule”, in the first place it occurs, insert “(except paragraph 29(7))”.

 

 

Finance Bill
Schedule 16 — Venture capital schemes etc
Part 3 — Excluded activities: receipt of royalties and licence fees

207

 

Enterprise investment scheme

11    (1)  

In section 297 of ICTA (qualifying trades)—

(a)   

in subsection (5), for paragraphs (a) and (b) substitute—

“(a)   

by the company mentioned in section 293(1), or

(b)   

by a company which was a subsidiary of that

5

company throughout a period during which it

created the whole or greater part (in terms of value) of

the intangible asset.”,

(b)   

in subsection (5A), omit paragraphs (b) and (c) and the words after

paragraph (c), and

10

(c)   

after subsection (5C) insert—

“(5D)   

If—

(a)   

the company mentioned in section 293(1) (“the

issuing company”) acquired all the shares (“old

shares”) in another company (“the old company”) at a

15

time when the only shares issued in the issuing

company were subscriber shares, and

(b)   

the consideration for the old shares consisted wholly

of the issue of shares in the issuing company,

   

references in subsection (5) above to the company mentioned

20

in section 293(1) include the old company.”

      (2)  

In section 304A of that Act (acquisition of share capital by new company)—

(a)   

in subsection (3), after “Chapter” insert “(except section 297(5D))”,

and

(b)   

in subsection (4), after “Chapter” insert “(except section 297(5D))”.

25

      (3)  

In section 576B of that Act (share loss relief: the trading requirement), after

subsection (8) insert—

“(9)   

In section 195 of ITA 2007 as applied by subsection (7) for the

purposes mentioned in subsection (8), references to the issuing

company are to be read as references to the company mentioned in

30

subsection (1).”

      (4)  

In section 576K of that Act (share loss relief: substitution of new shares for

old), after subsection (3) insert—

“(4)   

Nothing in subsection (2) applies in relation to section 195(7) of ITA

2007 as applied by section 576B(7) above for the purposes mentioned

35

in section 576B(8).”

      (5)  

In section 137 of ITA 2007 (share loss relief: trading requirement for shares

to which EIS relief not attributable), after subsection (8) insert—

“(9)   

In section 195 as applied by subsection (7) for the purposes

mentioned in subsection (8), references to the issuing company are to

40

be read as references to the company mentioned in subsection (1).”

      (6)  

In section 146 of that Act (share loss relief: substitution of new shares for

old), after subsection (2) insert—

“(3)   

Nothing in subsection (2) applies in relation to section 195(7) as

applied by section 137(7) for the purposes mentioned in section

45

137(8).”

 

 

Finance Bill
Schedule 16 — Venture capital schemes etc
Part 3 — Excluded activities: receipt of royalties and licence fees

208

 

      (7)  

In section 195 of ITA 2007 (EIS: excluded activities: receipt of royalties and

licence fees)—

(a)   

in subsection (4), for paragraphs (a) and (b) substitute—

“(a)   

by the issuing company, or

(b)   

by a company which was a qualifying subsidiary of

5

the issuing company throughout a period during

which it created the whole or greater part (in terms of

value) of the intangible asset.”,

(b)   

in subsection (6), omit the definition of “holding company”, and

(c)   

after that subsection insert—

10

“(7)   

If—

(a)   

the issuing company acquired all the shares (“old

shares”) in another company (“the old company”) at a

time when the only shares issued in the issuing

company were subscriber shares, and

15

(b)   

the consideration for the old shares consisted wholly

of the issue of shares in the issuing company,

   

references in subsection (4) to the issuing company include

the old company.”

      (8)  

In section 249 of that Act (substitution of new shares for old shares)—

20

(a)   

in subsection (2), after “Part” insert “(except section 195(7))”, and

(b)   

in subsection (4), after “Part” insert “(except section 195(7))”.

Venture capital trusts

12    (1)  

Section 306 of ITA 2007 (qualifying holdings) is amended as follows.

      (2)  

In subsection (4), for paragraphs (a) and (b) substitute—

25

“(a)   

by the relevant company, or

(b)   

by a company which was a qualifying subsidiary of the

relevant company throughout a period during which it

created the whole or greater part (in terms of value) of the

intangible asset.”

30

      (3)  

In subsection (6), omit the definition of “holding company”.

      (4)  

After that subsection insert—

“(7)   

If—

(a)   

the relevant company acquired all the shares (“old shares”) in

another company (“the old company”) at a time when the

35

only shares issued in the relevant company were subscriber

shares, and

(b)   

the consideration for the old shares consisted wholly of the

issue of shares in the relevant company,

   

references in subsection (4) to the relevant company include the old

40

company.”

Commencement

13         

This Part of this Schedule is deemed to have come into force on 6th April

2007.

 

 

 
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