VCM8121 - Venture Capital Schemes: funding limits for investee companies: Overview

ITA07/S173A, 173AA and 173AB (for EIS)
ITA07/S280B, 292A, 292AA and 292AB (for VCTs)

There are limits on the amount of relevant investments a company may receive, both in any 12 month rolling period and throughout the company’s lifetime.

ITA07/S173A, ITA07/280B and ITA07/S292A apply a limit on the amount of relevant investments a company may receive within a 12 month rolling period (the annual investment limit).

The annual investment limit is £5 million for most companies.

The annual investment limit was increased to £10 million in any rolling 12 month period for investments made in a knowledge-intensive company on or after 6 April 2018 (see VCM8162). The £5 million limit continues to apply to all other companies. See VCM8122 for more details on the annual limit.

The relevant investments that count towards the annual investment limit were extended by F(2)A 2015 to include relevant investments received by, or employed in, subsidiaries of the company or businesses transferred to the investee company in that period.

ITA07/S173AA, 280B(2)(b) and 292AA apply a limit on the amount of relevant investments a company may receive in its lifetime. See VCM8123

ITA07/S173AB, 280B(2)(c) and 292AB are anti-abuse provisions to prevent companies from sidestepping the limits by employing money raised through EIS or VCT in companies or businesses that are imported after the investment has been received. See VCM8123.

If a limit is exceeded no relief will be available on the whole of the investment which breaches the limit and not just the amount by which the limit is exceeded.

A relevant investment is:

  • An investment of any kind made by a VCT
  • An issue of shares in respect of which the company provides an EIS compliance statement (EIS1)
  • An issue of shares in respect of which the company provides an SEIS compliance statement (SEIS1)
  • An investment made in a social enterprise (shares or loan) in respect of which the social enterprise provides an SITR compliance statement (SITR1)
  • Any other investment which is a notified State aid approved by the European Commission in accordance with the Guidelines on State aid to promote risk finance investment. Companies will need to check with the issued or investment authority as to whether an investment is a notified State aid.

Notified UK State aids which have been approved under the Guidelines on State aid to promote risk finance investment, other than those listed above, include:

  • Investbx, West Midlands (C36/2005)
  • Prolongation Viridian Growth Fund, Northern Ireland (N144/2004)
  • Screen East Content Investment Fund, UK (N194/2006)
  • Regional Venture Capital Funds, UK (N334/2001)
  • Greater London High-Technology Seed and Creative Industries Funds, London (N5/2004)
  • Wales Early Stage Fund, Wales (N562/2006, N572/2003)
  • Special Purpose Equity Vehicle, North East (N601/2003)
  • Small and Medium Enterprise Venture Capital and Loan Fund, UK (N620/2002)
  • Northern Ireland Spinouts (NISPO), Northern Ireland (N652/2007)
  • Finance Wales JEREMIE Fund, Wales (N700/2007, SA.37202)
  • East Midlands Media Investments, East Midlands (N73/2005)
  • Corporate Venturing Scheme, UK (NN42a/2007)
  • Nesta Invention and Innovation Programme, UK (NN81/2005)
  • Enterprise Capital Funds, UK (SA.14373, SA.15373, SA.36428)
  • Northwest Urban Investment Fund (JESSICA), North West (SA.32835)

Any de minimis State aid received, excepting an SEIS or SITR investment is not a relevant investment. De minimis aid is not notified and therefore cannot be approved under the Guidelines on State aid to promote risk finance investment.

Companies that have received another form of State aid, whether de minimis or other aid, should check with the issuer or investment authority to ensure that the receipt of investment under the SEIS, EIS, SITR or VCT schemes does not have cumulation consequences in respect of the other aid received. Aid may be withdrawn where the cumulation thresholds are exceeded.