Taxation of Chargeable Gains Act 1992 Schedule 7AD paragraph 2

Meaning of "venture capital investment partnership"

Section 2 of Schedule 7AD defines what a "venture capital investment partnership" is by setting out the conditions a partnership must satisfy, and explains what happens if those conditions cease to be met.

• A venture capital investment partnership (VCIP) must have as its sole or main purpose the investment in unquoted shares or securities, as evidenced by the partnership agreement or any prospectus issued to prospective partners, and must not carry on a trade.
• At least 90% of the book value of the partnership's investments must be in shares or securities that were unquoted when acquired, or in shares that were quoted when acquired but reasonably expected to become unquoted within twelve months.
• Cash holdings (unless acquired to realise a gain on disposal) and quoted shares or securities received in exchange for unquoted ones are disregarded when applying the 90% test, which is assessed by reference to the partnership's end-of-period accounts.
• If a partnership ceases to meet the conditions it is treated as a VCIP until the end of that period of account, but it can never re-qualify as a VCIP thereafter — and a partnership is treated as the same partnership despite membership changes if at least one original member remains.