Income Tax Act 2007 section 285

Interpretation of Chapter

Section 285 provides key definitions used throughout the Venture Capital Trust (VCT) rules, including what counts as "securities", when shares are "eligible", which loans are excluded, and what constitutes a company's "investments".

• The term "securities" broadly includes a company's loan liabilities, but excludes loans repayable within five years, loans yielding above-commercial returns, and loans granting security rights or control over the company.
• A loan return is treated as commercial if it does not exceed 50% of the amount lent within the first five years and the total return over the full term does not exceed N × A × 10% (where N is the loan term in years and A is the amount lent or average amount outstanding).
• Shares are "eligible" only if they carry no preferential rights to dividends (where amounts or timing are discretionary or cumulative), no preferential rights to assets on winding up, and no right to be redeemed.
• A company's "investments" include cash it holds and sums owed to it where it has account-holder's rights — meaning it can direct payment of the sum and the sum arose from amounts paid in by or on behalf of the company.