The Venture Capital Trust (Amendment) Regulations 2008

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations amend the Venture Capital Trust Regulations 1995 (S.I. 1995/1979 as amended by S.I. 1999/819) (“the principal Regulations”).

The Income Tax Act 2007 (c. 3) (“ITA 2007”) restates provisions that relate to income tax, including those of the Income and Corporation Taxes Act 1988 (c. 1) (“ICTA 1988”). Part 6 of ITA 2007 contains restated provisions of ICTA 1988 relating to venture capital trust companies. These Regulations substitute references to terms and provisions of Part 6 of ITA 2007 for references contained in the principal Regulations to corresponding terms and provisions of ICTA 1988.

These Regulations also insert into the principal Regulations new provisions that deal with breaches of the conditions contained in Part 6 of ITA 2007 which a company is required to satisfy to continue to be approved as a trust company for the purposes of Part 6 (“VCT approval”).

Regulation 1 provides for citation and commencement.

Regulation 2 introduces the amendments to the principal Regulations.

Regulation 3 amends regulation 2 of the principal Regulations (interpretation).

Regulations 4 to 8 and 10 to 14 substitute references to terms and provisions of ITA 2007 for references to corresponding terms and provisions of ICTA 1988 contained in the principal Regulations.

Regulation 9 substitutes new regulations 8 to 8J for regulation 8.

New regulation 8 requires a trust company to give written notice to the Board if it has ceased to meet or is likely to cease to meet the conditions for VCT approval to continue in force.

New regulation 8A makes provision for cases where the Board may have grounds for withdrawing the VCT approval of a company. It provides that a company may apply to the Board for a determination that its VCT approval will not be withdrawn. The regulation also provides how and when the application is to be made and the content of the application.

New regulation 8B deals with breaches of conditions that must be continuously met during a period in order for VCT approval to continue in force. Where such a condition is broken the company is treated as rectifying the breach when its circumstances change so that the breach would not have occurred if those circumstances had existed throughout the period.

New regulation 8C deals with the case where there has been a breach of the conditions for VCT approval to continue in force which has been rectified at the time of application. If the Board are satisfied that the matters set out in the regulation apply in the case of the company they shall make a determination that the company’s approval as a trust company is not withdrawn.

New regulation 8D deals with the case where there has been a breach of the conditions for VCT approval to continue in force which has not been rectified at the time of application. If the Board are satisfied that the matters set out in the regulation apply in the case of the company they shall make a determination that the company’s approval as a trust company is not withdrawn.

New regulation 8E provides that matters within the control of an investment manager acting on behalf of a trust company are treated as being matters within the control of the company.

New regulation 8F specifies how the Board are to notify the company of their determination and how long a determination lasts where this relates to breaches that have not been rectified at the time of the determination. It also provides that the company must notify the Board when a breach has been rectified.

New regulation 8G makes provision for cases where after a determination has been made further circumstances arise that also cause or may cause the trust company to breach the conditions for its VCT approval to continue in force or which worsen an existing breach.

New regulation 8H provides for the making of further determinations in respect of an existing application for VCT approval not to be withdrawn.

New regulation 8I provides that if a company requests the Board to make a further determination in respect of an existing application for VCT approval not to be withdrawn a return must accompany the request and specifies the period the return must cover and its content.

New regulation 8J provides that where the Board have made a determination not to withdraw VCT approval they are not prevented from withdrawing VCT approval if other grounds for doing so exist or if the failure to meet the conditions for VCT approval to continue in force is not rectified.

A full and final Impact Assessment has not been produced for this instrument as a negligible impact on the private or voluntary sectors is foreseen.