What is the minimum investment on further issue condition for VCTs under section 280BA?

Section 280BA requires an approved venture capital trust that raises additional funds through a further issue of ordinary share capital to invest at least 30% of those proceeds in qualifying holdings. The deadline is 12 months after the end of the accounting period in which the further issue was made. Failure to comply may put VCT approval at risk.

What is the deadline for a VCT to meet the 30% qualifying holdings investment threshold?

The VCT must invest at least 30% of the funds raised by the further issue in qualifying holdings by the last day of the 12-month period immediately following the end of the accounting period in which the further issue was made. For example, a further issue in November 2024 with a 31 March year-end gives a deadline of 31 March 2026.

What happens if a VCT breaches the minimum investment on further issue condition?

If the VCT fails to invest at least 30% of further issue proceeds in qualifying holdings by the deadline, it breaches the condition under section 280BA. This breach can lead to the withdrawal of VCT approval, with significant consequences for both the company and its investors regarding tax reliefs associated with VCT status.

Does the minimum investment on further issue condition apply to each separate further issue independently?

Yes, the condition applies independently to each further issue of ordinary share capital made by an approved VCT after its first issue. It does not matter how many further issues the VCT makes; each one must separately meet the requirement to invest at least 30% of the funds raised in qualifying holdings within the prescribed deadline.

Income Tax Act 2007 section 280BA

The minimum investment on further issue condition

Section 280BA sets out the circumstances in which an approved venture capital trust (VCT) breaches the minimum investment requirement when it raises additional funds through a further issue of ordinary share capital.

This rule applies where a VCT that already has approval and has previously issued ordinary share capital goes on to make a further share issue.
At least 30% of the money raised by the further issue must be invested in qualifying holdings (shares or securities that count towards the VCT's qualifying investment requirements).
The deadline for making this investment is 12 months after the end of the accounting period in which the further issue takes place.
If the VCT fails to meet this 30% investment threshold by the deadline, it breaches the minimum investment on further issue condition, which may put its VCT approval at risk.

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