VCM54370 - VCT: VCT approval: breach of approval conditions: meaning of 鈥榦utside the control鈥�
The breach must be due to an event outside the control of the VCT; if the VCT was capable of taking action to avoid the breach it will not be considered to be 鈥榦utside the control鈥� of the VCT.
An example of an event outside the control of a VCT might be a take-over bid leading to either the disposal of shares in a qualifying investee company or the investee company ceasing to qualify under the Scheme. However, a commercial decision by the VCT to dispose of an investment would not be an inadvertent breach.
A further example might be if a breach occurs as a direct result of an action by a 鈥榯hird party鈥� in circumstances where the VCT or its advisors are not in a position to prevent such action. In such a case HMRC will consider the individual circumstances of the action in evaluating whether the breach is 鈥榦utside the control鈥�.
A failure by the VCT to make sufficient investments to meet the 70% test at the end of the provisional approval period would not, outwith exceptional circumstances, be considered outside its control.