SCHEDULES

SCHEDULE 2Venture capital schemes

Enterprise investment scheme

1

1

Part 5 of ITA 2007 (enterprise investment scheme) is amended as follows.

2

In section 179 (meaning of “qualifying business activity”)—

a

in subsection (2)(b)(i), omit “wholly or mainly in the United Kingdom”,

b

omit subsection (3),

c

in subsection (4)(b)(i) and (ii), omit “wholly or mainly in the United Kingdom”, and

d

omit subsection (5).

3

In section 180 (overview of Chapter 4), before paragraph (a) insert—

za

UK permanent establishment (see section 180A),

zb

financial health (see section 180B),

4

Before section 181 insert—

180AThe UK permanent establishment requirement

1

The issuing company must meet the UK permanent establishment requirement throughout period B.

2

The UK permanent establishment requirement is that the issuing company has a permanent establishment in the United Kingdom.

180BThe financial health requirement

1

The issuing company must meet the financial health requirement at the beginning of period B.

2

The financial health requirement is that the issuing company is not in difficulty.

3

The issuing company is “in difficulty” if it is reasonable to assume that it would be regarded as a firm in difficulty for the purposes of the Community Guidelines on State Aid for Rescuing and Restructuring Firms in Difficulty (2004/C 244/02).

5

After section 191 (and before the italic heading “Excluded activities”) insert—

191AMeaning of “permanent establishment”

1

This section applies for the purposes of this Part.

2

A company has a “permanent establishment” in the United Kingdom if (and only if)—

a

it has a fixed place of business there through which the business of the company is wholly or partly carried on, or

b

an agent acting on behalf of the company has and habitually exercises there authority to enter into contracts on behalf of the company.

3

For the purposes of this section “fixed place of business” includes (without prejudice to the generality of that expression)—

a

a place of management,

b

a branch,

c

an office,

d

a factory,

e

a workshop,

f

a mine, an oil or gas well, a quarry or any other place of extraction of natural resources, and

g

a building site or construction or installation project.

4

If the condition in subsection (5) is met, a company is not regarded as having a permanent establishment in the United Kingdom by reason of the fact that—

a

a fixed place of business is maintained there for the purpose of carrying on activities for the company, or

b

an agent carries on activities there for and on behalf of the company.

5

The condition is that, in relation to the business of the company as a whole, the activities carried on are only of a preparatory or auxiliary character.

6

For this purpose “activities of a preparatory or auxiliary character” include (without prejudice to the generality of that expression)—

a

the use of facilities for the purpose of storage, display or delivery of goods or merchandise belonging to the company,

b

the maintenance of a stock of goods or merchandise belonging to the company for the purpose of storage, display or delivery,

c

the maintenance of a stock of goods or merchandise belonging to the company for the purpose of processing by another person, and

d

purchasing goods or merchandise, or collecting information, for the company.

7

A company is not regarded as having a permanent establishment in the United Kingdom by reason of the fact that it carries on business there through an agent of independent status (including a broker or a general commission agent) acting in the ordinary course of the agent's business.

8

A company is not regarded as having a permanent establishment in the United Kingdom by reason of the fact that it controls a company that—

a

is resident there, or

b

carries on business there (whether through a permanent establishment or otherwise).

9

The Treasury may by regulations amend this section.