Section 280A | The 80% qualifying holdings condition: disposal of holding

From legislation.gov.uk

(1)This section applies if—

(a)a company which is a VCT disposes of shares or securities (“the holding”),

(b)the consideration for the disposal does not consist wholly of new qualifying holdings, and

(c)the holding was comprised in the company's qualifying holdings throughout the 6 months ending immediately before the disposal.

(2)For the purpose of determining whether the 80% qualifying holdings condition is, has been or will be met—

(a)the company is to be treated as if it continued to hold the holding for the period of 12 months beginning with the disposal (but see subsection (4)), and

(b)the value of the company's investments in that period is to be treated as reduced by the amount of any monetary consideration for the disposal.

(3)The value of the holding in the period mentioned in subsection (2)(a) is to be treated as equal to its value (determined in accordance with this Chapter) immediately before the disposal.

(4)If the consideration for the disposal includes new qualifying holdings, subsection (2)(a) has effect as if the reference to the holding were to the appropriate proportion of the holding (the value of which is that proportion of the value of the holding, determined in accordance with subsection (3)).

(5)The appropriate proportion is—

Formula

\frac{TC - NQH}{TC}

where—

TC is the market value (at the time of the disposal) of the total consideration for the disposal, and

NQH is the market value (at that time) of the new qualifying holdings.

(6)If at any time the value of the company's investments would by virtue of subsection (2)(b) be reduced to an amount less than the value of its qualifying holdings, the value of its investments at that time is to be treated as equal to the value of its qualifying holdings.

(7)“New qualifying holdings” means shares or securities which (on transfer to the company) are comprised in the company's qualifying holdings.

(8)If (and to the extent that) the holding was acquired with money the use of which is at any time ignored by virtue of section 280(2), subsections (2) to (6) do not apply in relation to that time.

(9)Nothing in this section applies in relation to disposals between companies that are merging (within the meaning of section 323).