Commentary on Sections Overview Overview Section 280: Conditions relating to qualifying holdings and eligible shares
843.This section provides a period of grace during which the proceeds from most further issues of ordinary shares by a VCT are disregarded in determining whether the VCT meets the 70% qualifying holdings condition and the 30% eligible shares condition. It is based on section 842AA(5A) and (5B) of ICTA and paragraph 11(1), (2) and (4) of Schedule 33 to FA 2002.
844.The underlying rationale is to give the VCT a reasonable amount of time to invest the proceeds of the further share issue in qualifying holdings before taking those proceeds into account for the 70% qualifying holdings condition and the 30% eligible shares condition. Without any period of grace those conditions might deter VCTs from issuing further share capital to raise funds for investment in qualifying holdings.
845.The section also contains powers to make regulations varying the treatment that would otherwise apply under this section. These powers have been used in making the Venture Capital Trust (Winding up and Mergers) (Tax) Regulations 2004 (SI 2004/2199).