Income Tax Act 2007 section 286

Qualifying holdings: introduction

Section 286 sets out the framework for determining whether shares or securities held by a venture capital trust (the investing company) in another company (the relevant company) count as qualifying holdings for VCT purposes.

• A holding qualifies only if the shares or securities were originally issued to the investing company, have been held continuously since issue, and were issued to raise money for promoting the growth and development of the relevant company's business
• The relevant company must satisfy a comprehensive list of requirements covering matters such as risk to capital, financial health, trading activity, employee numbers, gross assets, unquoted status, control and independence, and use of money raised
• Where a parent company is involved, the business test looks at the combined activities of all group companies as if they were a single business
• If only part of the money raised by an issue meets certain requirements (maximum qualifying investment, use of money raised, or the company carrying on the qualifying activity), the holding is split into two notional holdings — one qualifying and one not — with the value apportioned accordingly