VCM60137 - VCT scheme: general: approval: 70% qualifying holdings condition: disregard of disposals: example
Example of disposal of qualifying holding – no new qualifying holdings included in consideration received
A VCT with full approval has qualifying holdings of £1.5m
and total investments of £2m. Its qualifying holdings are
therefore 75% by value of its total investments
On 10 April 2007 it disposes of a qualifying holding that it
has held for more than 6 months. The holding was previously valued
at £200,000 and is sold for £350,000 comprising
£250,000 in cash and £100,000 in loan notes.
|
| Qualifying Holdings(QI) | Total Investments(TI) | QI/TI x 100% |
| Before disposal
| £1.5m | £2.0 | 75% |
Disposal: 10 April 2007
Original cost: £200,000
Total Proceeds: £350,000
Proceeds comprise:
- £250,000 in cash (monetary), and
- £100,000 in loan notes (non-monetary)
After disposal
Before the application of S280A
|
| £1.3m | £2.15m | 60% |
Applying S280A(2)(a)
The VCT is treated as retaining 100% of the qualifying holding
disposed of. It is therefore treated as retaining £200,000
(being the original cost) in addition to the actual qualifying
holdings of £1.3m, making a total of £1.5m qualifying
holdings.
It is also treated as retaining £200k for the purpose of
its total investments, making total investments before the
application of S280A(2)(b) of £2.35m.
Applying S280A(2)(b)
The VCT’s total investments are then treated as reduced by the monetary consideration received, £250,000. VCT’s total investments are therefore (£2.35M less £25O,OOO) £2.1m.
|
| Qualifying Holdings(QI) | Total Investments (TI) | QI/TI x 100% |
| After the application of
S280A
| £1.5m | £2.1m | 71% |
The calculation for the purpose of the 70% qualifying
holdings condition will include the deemed retained holding, valued
at £200,000, and the deemed reduction in the investments of
£250,000 for 6 months following the date of the disposal of
the investment.
These adjustments apply for the full 6 months whether or not
the VCT invests or otherwise disposes of the consideration received
in that period.
