Income Tax Act 2007 section 297B

The proportion of skilled employees requirement

Section 297B requires certain knowledge-intensive companies that qualified for VCT investment on the basis of their skilled workforce (rather than their innovation activity) to maintain a minimum proportion of skilled employees for three years after the investment is made.

• Where a company qualified as knowledge-intensive solely through the skilled employee condition (not the innovation condition), at least 20% of its full-time equivalent employees must be skilled employees throughout the three years following the issue of the relevant holding
• For a standalone company, the 20% threshold applies to its own workforce; for a parent company, the threshold applies across the entire group
• This requirement is triggered only where the company relied on its knowledge-intensive status to satisfy one or more of the higher limits for maximum risk finance investments, permitted company age, or number of employees
• A company in administration or receivership is given a concession and will not be treated as failing this requirement during that period