S496 Qualifying investment (company perspective)

Summary

(1) This section provides that an investment shall be a qualifying investment where an individual subscribes for eligible shares in a qualifying company, and the company uses that amount which has been subscribed wholly or mainly for a qualifying purpose within the relevant period, and the investment complies with this section.

(2) A qualifying purpose means using the amounts in the qualifying company, or a qualifying subsidiary for the purposes of carrying on relevant trading activities. If the company has not commenced to trade, means using the amounts for the purpose of carrying on R&D+I which is connected with and undertaken with the intention of carrying on of relevant trading activities. The use of the money will contribute directly to the creation or maintenance of employment in the company, and does not include using the amounts on the acquisition either directly or indirectly, of an interest in another company whereby that company becomes a qualifying subsidiary, a further interest in a qualifying subsidiary, or a trade.

(3) If only part of the amount subscribed is used wholly or mainly for a qualifying purpose O then references to a qualifying investment shall refer to the corresponding proportion of that investment.

(4) An investment shall not be a qualifying investment unless it is based on a business plan.

(5) An initial investment which may be a qualifying investment will be one where a RICT Group makes its first investment, issuing eligible shares, and it is less than 7 years since it has made its first commercial sale, then it shall be a qualifying investment.

(6) A qualifying investment that is expansion risk finance investment shall only be qualifying where it is an investment made based on a business plan prepared specifically with the purpose of entering a new product or geographical market. The amount to be raised through the issue of those shares relating to the expansion risk finance investment must be greater than 50 per cent of the RICT group’s average annual turnover in the preceding 5 years.

(7) A qualifying investment that is follow-on risk finance investment shall only be qualifying where the initial risk finance investment, or expansion risk finance investment, whichever the case may be, involved the issue of eligible shares on or after 6 April 1984 in respect of which relief was available under this Part, and the possibility of the follow-on risk finance investment was foreseen in the business plan upon which the initial risk finance investment, or expansion risk finance investment (if they had a new product or new market), whichever the case may be, was based.

Relevant Date: Finance Act 2021