Explanatory note

These Regulations make provision for ensuring that a venture capital trust continues to be approved by the Board of Inland Revenue for tax relief purposes in cases where shares or securities held by the venture capital trust are exchanged for other shares and securities and not for cash. The Regulations specify cases and conditions where the new holding of shares and securities arising from the exchange is treated as meeting the requirements of section 842AA(2)(b) to (d) of, and Schedule 28B (“Schedule 28B”) to, the Income and Corporation Taxes Act 1988 relating to qualifying holdings in venture capital trusts. (Schedule 28B was inserted by section 70(2) of the Finance Act 1995 (c. 4)).

Regulation 1 provides for citation and commencement, and stipulates that the Regulations have effect in relation to exchanges of shares and securities occurring on or after 21st March 2000. Authority for the retrospective effect of these Regulations is conferred by paragraph 11B(6)(c) of Schedule 28B (inserted by paragraph 8(1) of Schedule 18 to the Finance Act 2000 (c. 17)).

Regulation 2 provides definitions for the purposes of the Regulations, and regulation 3 sets out the scope of the Regulations.

Regulations 4 to 6 specify the cases involving exchanges of shares and securities to which the Regulations apply (whether an exchange of shares and securities in the same company or for those in another company).

Regulations 7 to 9 make provision for treating the requirements of section 842AA(2)(b) to (d) and Schedule 28B as met in relation to each of the cases specified in regulations 4 to 6.

Regulation 10 makes provision for earn-out rights, and shares and securities issued in pursuance of such rights.

Regulation 11 provides an apportionment rule covering new shares and new securities.