Income Tax Act 2007 section 280A

The 80% qualifying holdings condition: disposal of holding

Section 280A provides relief for VCTs that dispose of qualifying holdings, giving them a 12-month grace period during which they are treated as still holding the disposed investment for the purpose of meeting the 80% qualifying holdings condition.

• When a VCT sells shares or securities that have been part of its qualifying holdings for at least 6 months, and the sale proceeds are not entirely reinvested in new qualifying holdings, the VCT is treated as still holding the investment for 12 months after the disposal.
• During that 12-month period, the value of the VCT's total investments is reduced by the cash element of the sale proceeds, preventing the cash from inflating the denominator in the 80% qualifying holdings calculation.
• Where part of the consideration consists of new qualifying holdings, the grace period applies only to the non-qualifying portion of the proceeds, calculated using a formula based on market values at the time of disposal.
• The relief does not apply to holdings originally acquired with money from further share issues that is already disregarded under section 280(2), nor does it apply to disposals between VCTs that are merging.