Corporate Venturing

Using the Corporate Venturing Scheme

Summary

Before it issues shares, an issuing company may, if it wishes, apply to us for 'advance clearance' that the requirements of the CVS, other than those that must be satisfied by the investing company, are being met. We hope that this facility will help issuing companies to attract funding under the CVS by enabling them to offer greater certainty to investors.

Following the issue of the shares, issuing companies will need to provide us with a 'compliance statement', which will confirm the conditions relating to the issuing company and to the shares issued have been met, or are being met for the time being. We can then authorise the issuing company to provide a 'compliance certificate' to investing companies.

Once an investing company has a compliance certificate, it can claim investment relief in its company tax return for the relevant shares. But, if the trade being funded by the money raised from the issue of the shares has not carried on for four months when the shares were issued, the issuing company will need to wait until it has before it makes a claim.

Investing companies will claim the reliefs in their tax returns in the normal way, via the Tax Office that normally deals with their affairs. But, the CVS is administered centrally as far as determining whether the conditions are met by

• the issuing company, and
• the investment.

Advance clearance

If the issuing company applies for 'advance clearance' and the relevant conditions are met, we will issue an advance clearance notice. This will state that, on the basis of the information provided, we are satisfied that the requirements relating to the issuing company, together with the general requirements of the CVS (such as those relating to the shares, and to the use of the money raised) have been met, or will be met, for the proposed issue of shares.

When we receive an application for an advance clearance notice and we are satisfied, on the basis of the information provided with the application, we will issue the notice within 30 days of receiving the application.

If necessary, we will ask for further information to be provided within a specified time. If we are then satisfied, we will issue the notice within 30 days of the information, or any further information, being provided. If we are not satisfied with the application, we will notify the company within the same time period.

If we are not satisfied that the requirements will be met, or will be met for the time being, or if we fail to notify the issuing company within the time allowed, the company may require the application, together with any information notices and further particulars, to be sent to the Special Commissioners.

If the Special Commissioners are satisfied that the requirements relating to the issuing company and the investment will be met, or will be met for the time being, they will notify the issuing company. This notification has the effect of an advance clearance notification issued by us.

If the applicant does not fully and accurately disclose all relevant information, or if it or any of its subsidiaries fails to act in accordance with any assurances or statements of intent which were given, any advance clearance notice given will be void.

Statement of Practice 1/ 00 provides further information on the procedure for applying for advance clearance (see the Appendix).

The compliance statement

Issuing companies submit compliance statements to the Small Company Enterprise Centre (SCEC) using form CVS1, available from the SCEC (details are in the Further information section).

An issuing company may submit a compliance statement for an issue of shares in any accounting period

• from the time the shares are issued (or four months from the time the funded trade starts)
• not later than two years after the end of that accounting period, or two years after the start of the trade if this is later.

The compliance certificate

If we are satisfied that the information given in a 'compliance statement' is correct and meets our requirements, we will authorise the issuing company to issue a 'compliance certificate' to any investing company that requests one.

An issuing company must not issue a compliance certificate without our authority, and an investing company cannot claim investment relief unless it has a compliance certificate for the relevant shares.

Issuing companies have a right to appeal against our decision not to allow a compliance certificate to be issued.

Obligation to notify

Investment relief can be reduced or withdrawn in full for an issue of shares on the grounds that

• the issuing company requirements or the general requirements are not met at any time during the qualification period
• the investing company requirements are not met at any time during the qualification period
• value has been received. The time limits for notifying us are shown below.

These time limits also apply if the shares cease to meet the qualifying conditions.

If we believe that we should have been notified of an event but have not been, we can require the person concerned to provide the appropriate information.

We can withdraw relief if we discover grounds for withdrawal without being notified by the appropriate persons. But, we must give notice to the investing company beforehand, and a company receiving such a notice has the right to appeal against it.

Can investing companies get advance clearance (that they are carrying out the right kind of trade) for the CVS?

The Small Company Enterprise Centre will help investing companies with any query they have concerning interpretation of the rules of the CVS which apply to them, but, there is no advance clearance procedure.

If an issuing company attracts investment under the Enterprise Investment Scheme or Venture Capital Trust scheme as well as CVS, will it have to seek advance clearances from different parts of the Inland Revenue?

No. All three schemes are dealt with at the Small Company Enterprise Centre.