VCM15100 - Investee companies: gross assets rule

ICTA/S293 (6A); ITA/S186; ITA/S297; ICTA/SCH15/PARA22

Upper limits on the size of the company invested in are imposed by reference to the size of its gross assets. Those limits are:

• £7m immediately before the issue of the shares, and
• £8m immediately after the issue.

(For shares issued before 6 April 2006 those limits were £15m and £16m respectively.)

All forms of property that appear on a company’s balance sheet are assets for the purpose of this rule. HMRC has issued SP2/06 indicating that ordinarily we will determine the value of a company's assets by reference to the values shown on its balance sheets.

In the case of a company with subsidiaries, the rule applies to the total of the gross assets of the company and its subsidiaries (excluding shares in, and loans to, those subsidiaries). For this purpose it is important to look at the assets of each separate company and not at those shown on the consolidated balance sheet for the group.