What are the transitional gross assets thresholds for VCT investments issued between 6 April 1998 and 5 April 2006?

For shares or securities issued between 6 April 1998 and 5 April 2006, paragraph 76 of Schedule 2 to the Income Tax Act 2007 increases the gross assets limits to £15 million immediately before the investment and £16 million immediately afterwards, replacing the standard section 297 thresholds of £7 million and £8 million.

What gross assets limits apply to VCT investments in shares issued before 6 April 1998?

For shares or securities issued before 6 April 1998, the transitional gross assets thresholds are £10 million immediately before the VCT's investment and £11 million immediately afterwards. These replace the standard £7 million and £8 million limits under section 297 of the Income Tax Act 2007.

How does the deeming rule in paragraph 76 affect shares acquired after 6 April 2006 using pre-2006 funds?

If a VCT acquires shares or securities using money originally raised by issuing its own shares before 6 April 2006, or money derived from reinvesting those funds, the acquired shares are treated as issued before 6 April 2006. This means the higher transitional gross assets thresholds apply even though the actual acquisition occurred after that date.

When do the standard £7 million and £8 million gross assets thresholds apply to VCT qualifying holdings?

The standard gross assets limits of £7 million before investment and £8 million immediately after apply to VCT investments funded by capital raised from 6 April 2006 onwards. The transitional higher thresholds under paragraph 76 only apply to shares or securities issued, or deemed issued, before 6 April 2006.

Income Tax Act 2007 Schedule 2 para 76

The gross assets requirement

Schedule 2 paragraph 76 sets out transitional modifications to the gross assets requirement under section 297 for shares or securities issued before 6 April 2006, applying higher asset thresholds depending on the date of issue.

For shares or securities issued between 6 April 1998 and 5 April 2006, the gross assets limits in section 297 are increased to £15 million (before investment) and £16 million (immediately after investment), replacing the standard £7 million and £8 million thresholds.
For shares or securities issued before 6 April 1998, the gross assets limits are set at £10 million (before investment) and £11 million (immediately after investment), replacing the standard £7 million and £8 million thresholds.
Where a company acquires shares or securities using money raised from issuing its own shares or securities before 6 April 2006, or money derived from the reinvestment of such funds, those acquired shares or securities are treated as having been issued before 6 April 2006 for the purposes of these transitional rules.
These transitional provisions only apply when determining whether shares or securities form part of a VCT's qualifying holdings; the current standard thresholds of £7 million and £8 million apply to investments made from 6 April 2006 onwards using newly raised funds.

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