VCM12055 - Limit on amount raised in any 12-month period
ITA/S173A; ITA/S292A; FA00/SCH15/PARA35A
No company (or group of companies) can raise more than £2
million under the three venture capital schemes – the
Enterprise Investment Scheme (EIS), the Corporate Venturing Scheme
(CVS) and Venture Capital Trusts (VCTs) – in any 12-month
period.
Should the £2 million limit be exceeded in a 12-month
period, no relief will be available on the whole of the investment
which breaches the limit.
The limit operates on a rolling basis. In respect of any
issue of shares (or, in the case of investment by a VCT, shares or
securities) it looks at relevant investments made in the company
during the year ending with the date those shares (or in the case
of a VCT, shares or securities) are issued.
Investments to which the £2 million limit applies
The £2 million limit applies:
- For EIS and CVS, to shares issued on or after 19 July 2007, unless the shares were issued to the managers of an Approved EIS Investment Fund which closed before 19 July 2007, and
- For VCTs, to all investments made on or after 6 April 2007, unless the investment is of “protected money”.
“Protected money” is money raised by the issue of
shares or securities by a VCT before 6 April 2007, or money derived
from the investment of such money. The VCT will be able to tell a
company in which it is investing whether the investment is of
“protected money”. See
VCM60620 onwards for more information on
“protected money.
To the extent that a share issue includes shares on which
relief is to be claimed under EIS or CVS, it is only those shares
that are included on EIS or CVS compliance statements (forms EIS1
or CVS1) that contribute towards the limit.
So while all shares included on forms EIS1 or CVS1 count as
relevant investments, not all shares within an issue (or
subscription) should necessarily be included on those forms –
only those shares in respect of which the investor has requested
that the company issue a compliance certificate (form EIS3 or
CVS3).
In order not to unnecessarily restrict their ability to raise
funds, companies should ensure that only those investors who have
indicated that they want an EIS3 or CVS3 so that they can claim
relief are entered on the compliance statement.
There is no statutory provision to amend an EIS1 or CVS1,
once submitted, but where an EIS1 contains factual errors then
corrections can be made within the time limit for the original
submission.
Example 1
| 1 September 2007: | Company issues shares for £600,000 |
| 1 October 2007: | Company submits an EIS compliance statement (form EIS1) covering all of those shares to the Small Companies Enterprise Centre (SCEC). The SCEC accepts it and provides the company with certificates (forms EIS3) for the investors to claim relief |
| 1 February 2008: | Company issues a further £1.5 million of shares |
| 1 March 2008 | Company submits an EIS1 covering all of those further shares |
Because the EIS1 relating to the second share issue covers
shares that breach the £2 million limit the SCEC will not
issue forms EIS3 and the investors in that issue will be unable to
claim tax relief. Note that no relief is available in
respect of any of the shares in that issue, even though the £2
million limit was only breached to the extent of £100,000.
It is also important to note that it is the amounts entered
on the compliance statement that count, irrespective of whether
relief is actually claimed on all those amounts. It may be that,
for various reasons, investors find they were unable to claim
relief on more than £100,000 of the £600,000 invested in
the first issue on 1 September 2007. That makes no difference; it
is still the figure of £600,000 that counts towards the
£2 million limit.
This limit operates by reference to the dates on which
relevant investments in the company have been made, not by
reference to the dates on which compliance statements are
submitted. If compliance statements are not made in the same
sequence as the share issues to which they relate the submission of
compliance statement for an earlier issue may impact on the
availability of relief on shares which have already been included
on a compliance statement which relates to a later issue. The
following example illustrates this.
Example 2
The facts are the same as in Example 1 above, except that, for some reason, the company does not submit the compliance statements in the order in which the shares were issued.
| 1 September 2007: | Company issues shares for £600,000 |
| 1 February 2008: | Company issues another £1.5 million of shares |
| 1 March 2008 | Company submits an EIS1 covering all the shares issued on 1.February. The SCEC issues forms EIS3 in respect of those shares, allowing investors to claim relief. |
| 1 October 2008: | Company submits an EIS1 covering all the shares issued for £600,000 on 1 September the previous year. |
The latter compliance statement relates to the share issue that pre-dates (by 5 months) the issue reported on the statement received in March. The £600,000 of shares covered by this later statement must now be taken into account in determining whether relief was due on the £1.5 million of shares issued on 1 February 2008. Doing so means that no relief is due to any investors in the second issue, and any relief that has been given on those shares will be withdrawn. Relief may however be due on the £600,000 of shares since at the time those shares were issued the £2 million limit was not breached.
