VCM8168 - Venture Capital Schemes: the changes in detail: knowledge-intensive companies: date of reaching £200,000 annual turnover
ITA 07/S252B (for EIS)
ITA 07/S331B ( for VCT)
VCM8151 explains how to determine the date the company reaches the initial investment period. The initial investing period is 10 years for a knowledge-intensive company. The end of that period is generally determined by counting 10 years from the date of its first commercial sale.
However, for investments in knowledge-intensive companies made on or after 6 April 2018, instead of using the date of first commercial sale, the company may choose instead to use the date on which the company’s annual turnover exceeded reaches £200,000. The company reaches an annual turnover of £200,000 where its annual turnover is £200,000 or more and the annual turnover for all earlier accounting periods is less than £200,000.
The company’s annual turnover is:
- For an accounting period of 12 months, the turnover of that accounting period, or
- For an accounting period that is not a 12 month accounting period, the turnover for the 12 months ending on the date of the end of the accounting period, apportioned as appropriate.
The date on which a company’s annual turnover reaches £200,000 is:
- For companies with an accounting period of 12 months or less, the last day of the accounting period
- For companies with an accounting period of more than 12 months, the date 12 months after the start of the accounting period.
The turnover includes the turnover of any company that is a subsidiary of the issuing company during the whole or any part of the period (a “group company”). Where a company was a group company for only part of an accounting period, its turnover should be apportioned to take into account only the time it was a member of the group.
Where apportionment is necessary for the purposes of determining annual turnover for a company with an accounting period that is not a 12 month accounting period and/or for determining the turnover of a company that was a group company for only part of the period, turnover should be apportioned by reference to the length (in time) of each respective period. For accounting periods of less than 12 months, (accounting period A), the turnover of the accounting period immediately preceding accounting period A should be apportioned as necessary and added to the turnover of accounting period A. For accounting periods of more than 12 months, the turnover of the whole accounting period should be apportioned to arrive at an annualised turnover.
Example
Company A is a knowledge-intensive company. It recorded turnover in its accounting periods as follows:
10 January 2015- 31 March 2015 turnover £10,000
1 April 2015 – 31 December 2015 turnover £100,000
1 January 2016 – 29 February 2016 turnover £95,000
The accounting period ending on 29 February 2016 is less than 12 months and so to calculate the annual turnover, it is necessary to add the turnovers for the two accounting periods from 1 April 2015 to 29 February 2016 together with a proportion of the turnover from the previous accounting period for the balance of the time, starting from 1 March 2015 to make up a full 12 months (366 days in this case as 2016 was a leap year).
The apportioned turnover is £4366, and the total turnover for the 12 month period is just under £200,000.
Example
Company B is a knowledge-intensive company. Its turnover was £450,000 in the period from 1 April 2015 to 31 October 2016. The annualised turnover would be £300,000 and therefore the £200,000 threshold was reached on 31 March 2016.