Income Tax Act 2007 section 327A

Follow-on funding

Section 327A ensures that when a company is restructured through a qualifying share-for-share exchange, the new parent company can continue to receive Venture Capital Trust (VCT) funding by inheriting the investment history of the old company.

• When a new company acquires an old company through a qualifying share-for-share exchange under section 326, the new company inherits the old company's investment history for VCT purposes.
• For the permitted maximum age condition (which limits VCT investment to companies below a certain age), any relevant investments previously made in the old company are treated as if they had been made in the new company.
• For the permitted company age requirement (which applies to qualifying holdings), the same principle applies: the old company's prior investments count as investments in the new company.
• The money raised by the new company through follow-on VCT funding must be used for the same business activities as the original investment in the old company.