VCM60120 - VCT scheme: general: approval: conditions for provisional approval

ITA/S275; SI1995/1979 Regulation 4

A company which does not meet the conditions for full approval (see VCM60110) may be given provisional approval where it satisfies HMRC that:

• in relation to the accounting period which is current when the application is made, or the next accounting period, and in following accounting periods:
• • its income in them will be derived wholly or mainly from shares or securities ( VCM60130),
  • no holding in any company will represent more than 15% by value of its investments at any time during them ( VCM60160),
  • its ordinary share capital will be included in the official UK list throughout them, and
  • it will not retain more than 15% of its income derived in them from shares and securities (see VCM60170), and

• in relation to an accounting period of the company beginning no more than 3 years after approval is given or, if earlier, when approval takes effect, and in following accounting periods:
• • at least 70% by value of its investments will be in qualifying holdings of shares or securities throughout them ( VCM60135 onwards), and
  • at least 30% by value of its qualifying holdings will be in holdings of eligible shares throughout them ( VCM60140).

However, if further ordinary shares are issued the relaxation described in VCM60180 will apply.

With effect from 6 April 2007 the term ‘investment’ in the 70% qualifying holding condition and 15% holding limit condition includes cash and other funds held by the VCT or held by a third party on its behalf - see VCM60135.

A company meeting the conditions for provisional approval will be sent an approval notice specifying:

• the date on which the approval is given, and
• the date from which approval shall have effect.

If the approval is to take effect from a date earlier than that on which approval is given, the 3 year period mentioned in the second bullet above runs from that earlier date.

Notices giving provisional approval may show additional conditions to be met by the company which are designed to ensure that it meets the conditions outlined above. The company may appeal to the Special Commissioners against the inclusion of additional conditions.