Income Tax Act 2007 section 327

Certain requirements of Chapter 4 to be treated as met

Section 327 ensures that when a VCT's qualifying holding in an old company is exchanged for shares in a new company under a company reorganisation, the various Chapter 4 qualifying holding requirements are treated as continuing to be met in relation to the new shares, so that VCT status is not disrupted by the restructuring.

• Where the trading and qualifying activity requirements were met for the old company immediately before the reorganisation period began, they are treated as met for the new company and the matching new shares throughout that period, unless they would have ceased to be met anyway.
• Where old shares met requirements such as maximum risk finance investment caps, use of money raised, permitted company age, gross assets, employee numbers, and skilled employee proportions immediately before the exchange, those requirements are treated as equally met for the corresponding new shares going forward, with references to the old company read as including the new company where necessary.
• For the maximum qualifying investment requirement, the new shares are treated as representing an investment that raised the same amount of money as the matching old shares, issued at the same time as the old shares were originally issued.
• When assessing the control and independence requirement during the reorganisation period, both the arrangements themselves and any share exchanges already completed under them are ignored, and the value of new shares for the eligible shares proportion requirement is taken to be the same as the last valuation of the old shares they replaced.