Income Tax Act 2007 section 278

Conditions relating to value of investments: general

Section 278 establishes how the value of a VCT's investment holdings should be determined for the purposes of three key conditions: the 15% holding limit, the 80% qualifying holdings condition, and the 70% eligible shares condition.

• Investment holdings are generally valued at their acquisition cost, preventing routine market fluctuations from causing a VCT to breach the relevant conditions.
• If further investments of the same type are added to a holding, or a payment is made that increases a holding's value by discharging an obligation, the holding is revalued immediately after that addition or payment.
• An addition occurs when a company acquires further investments of the same description, but not where shares or securities are allotted for no consideration.
• Where a scheme of reconstruction results in new shares or securities being issued proportionately to existing shareholders for no consideration, the old holding and the new corresponding holding are treated as the same holding for valuation purposes.