VCM60135 - Venture capital trust (VCT) scheme: General: Approval - the 70% qualifying holdings condition

ITA/s274(2) and ITA/S280

At least 70% by value of a VCT’s investments must, throughout its most recent accounting period, be represented by shares or securities comprised in qualifying holdings of the company.

For the definition of qualifying holdings see VCM62010 onwards.

With effect from 6 April 2007 for the purpose of this test and for the purpose of the 15% holding limit condition (VCM60160) the company’s investments are to include, so far as they would not otherwise do so, all money in the company’s possession and any sum owed to the company if the company has “account-holder’s rights” over that sum, ITA/S285(4).

A company has account-holder’s rights over an identified or deposited sum owed to it if it has the right to require the holder to pay amounts out of the sum either to it or at its direction, (ITA/S285(5)). Examples would be bank accounts, whether interest bearing or not, and accounts held on the company’s behalf by third parties such as solicitors or fund managers.

The extension to the meaning of investment in ITA/S285(4) does not include anything to which the company is not beneficially entitled. Money held for example by the company as trustee for a third party would not usually be included in the company’s investments for the purpose of the 70% and 30% tests and 70% and 70% tests from 6 April 2011. However the company is taken to be beneficially entitled to all sums subscribed for shares issued by the company, and to anything that the company is entitled that represents those sums, ITA/S285(6).

Where a VCT disposes of a qualifying holding on or after 6 April 2007, the disposal is disregarded for a period of six months for the purpose of the 70% qualifying holding condition under ITA/S280A (VCM60137).