Section 292AB — Income Tax Act 2007: Maximum risk finance investments during the 5-year post-investment period requirement

Maximum risk finance investments during the 5-year post-investment period requirement 292AB 1 The requirement of this section applies if condition A or B is met.

2 Condition A is that—

a a company becomes a 51% subsidiary of the relevant company at any time during the 5-year post-investment period, b all or part of the money raised by the issue of the relevant holding is employed for the purposes of a relevant qualifying activity which consists wholly or in part of a trade carried on by that company, and c that trade (or a part of it) was carried on by that company before it became a 51% subsidiary as mentioned in paragraph (a).

3 Condition B is that all or part of the money raised by the issue of the relevant holding is employed for the purposes of a relevant qualifying activity which consists wholly or in part of a trade which, during the 5-year post-investment period, becomes a relevant transferred trade (see subsection (7)).

4 The requirement of this section is that, at all times during the 5-year post-investment period, the total of the relevant investments made in the relevant company before the time in question (“ the relevant time ”) must not exceed—

a if at the investment date the relevant company is a knowledge-intensive company (see section 331A) and—

i not a specified Northern Ireland company, £40 million;

ii a specified Northern Ireland company, £20 million, and b if at the investment date the relevant company is not a knowledge-intensive company and—

i not a specified Northern Ireland company, £24 million;

ii a specified Northern Ireland company, £12 million.

5 In subsection (4) the reference to relevant investments made in the relevant company includes—

a any relevant investment made in any company that has at any time before the relevant time been a 51% subsidiary of the relevant company (including investments made in that company before it became such a subsidiary but, if it is not such a subsidiary at the relevant time, not investments made in it after it last ceased to be such a subsidiary),

b any other relevant investment made in a company to the extent that the money raised by the investment has been employed for the purposes of a trade carried on by another company that has at any time before the relevant time been a 51% subsidiary of the relevant company (but, if it is not such a subsidiary at the relevant time, ignoring any money so employed after it last ceased to be such a subsidiary),

and c any other relevant investments made in a company where—

i the money raised by the investment has been employed for the purposes of a trade carried on by that company or another person, and ii after that investment was made, but before the relevant time, that trade (or a part of it) became a relevant transferred trade (see subsection (7)).

6 If only a proportion of the money raised by a relevant investment is employed for the purposes of a trade which became a relevant transferred trade, the reference in subsection (5)(c) to the relevant investment is to be read as a reference to the corresponding proportion of that investment.

7 Where—

a a trade is transferred—

i to the relevant company, ii to a company that at the relevant time is, or has before that time been, a 51% subsidiary of the relevant company, or iii to a partnership of which a company within sub-paragraph (i) or (ii) is a member, (including where it is transferred to a company within sub-paragraph (ii), or a partnership of which such a company is a member, before the company became such a subsidiary but, if the company is not such a subsidiary at the relevant time, not where it is transferred to such a company or partnership after the company last ceased to be such a subsidiary),

and b the trade or a part of it was previously (at any time) carried on by another person, the trade or part mentioned in paragraph (b) becomes a “ relevant transferred trade ” at the time it is transferred as mentioned in paragraph (a).

8 In this section— “ 5-year post-investment period ” means the period of 5 years beginning with the day after the investment date; “ the investment date ” means the date on which the relevant holding is issued; “ relevant investment ” has the meaning given by section 292A(3), and section 292A(4) and (4A) (which determines when certain investments are made) applies for the purposes of this section; and section 280B(8) and (9) (meaning of “trade” etc ) applies for the purposes of this section as it applies for the purposes of section 280B.

9 Subsection (10) applies if, by virtue of the provision of a compliance statement under section 205, 257ED or 257PB, the requirement of this section is not met.

10 The requirement is to be treated as having been met throughout the period—

a beginning with the investment date, and b ending with the time the compliance statement was provided.