Income Tax Act 2007 section 288

The no guaranteed loan requirement

Section 288 requires that a VCT's relevant holding must not include any securities that relate to a guaranteed loan, and defines what constitutes a guaranteed loan for this purpose.

• The relevant holding must contain no securities relating to a guaranteed loan.
• A security relates to a guaranteed loan if arrangements exist for the investing company to receive anything from a third party — directly or indirectly — in the event that any person fails to comply with the loan terms or the terms of the security.
• It does not matter whether the guarantee arrangements apply to all cases of non-compliance or only to some cases.
• A "third party" means any person other than the relevant company itself, and — where the relevant company is a parent company meeting the trading requirement under section 290(1)(b) — other than that company's subsidiaries.