Mr Howard Flight (Arundel & South Downs, Conservative)

I beg to move amendment No. 25, in page 169, line 20, after `(a)', insert `at least'.

The amendment raises a brief drafting point. As drafted, the schedule provides that a figure of 80 per cent. has to be invested during the first 12 months. I am sure that the Government mean not that it should be exactly, but at least, 80 per cent. It would clearly not be practical to achieve precisely 80 per cent.—hence the amendment. I hope that the Government support it.

Miss Melanie Johnson (Economic Secretary, HM Treasury; Welwyn Hatfield, Labour)

I am grateful to the hon. Gentleman for his remarks. He says that it is just a small amendment, but it is a helpful one and we understand why it has been tabled. There are similar changes in schedules 15 and 16 to the EIS and CVS schemes, both of which use the phrase ``at least 80 per cent.'' While the existing drafting probably still allows the meaning to be construed as at least 80 per cent., it would be helpful to include the words ``at least''. It would therefore be instructive to avoid the possibility of confusion by having the same language used in regard to all the schemes.

Mr Howard Flight (Arundel & South Downs, Conservative)

I thank the Minister for her comments. I am ``Shocked of Arundel''.

Amendment agreed to.

Miss Melanie Johnson (Economic Secretary, HM Treasury; Welwyn Hatfield, Labour)

I beg to move amendment No. 6, in page 172, leave out lines 3 and 4 and insert—

`(5) For sub-paragraph (4) of that paragraph (calculation of amounts of original and replacement value) substitute—

``(4) For the purposes of this paragraph, the amount of the replacement value is—'.

Mr Edward O'Hara (Knowsley South, Labour)

With this it will be convenient to take amendment No. 26, in page 172, line 5, at beginning insert

`the amount of the replacement value is—'.

Miss Melanie Johnson (Economic Secretary, HM Treasury; Welwyn Hatfield, Labour)

The schedule keeps the VCT and CVS schemes in line with the enterprise investment scheme, following the changes made to it by schedule 15. All those schemes provide generous tax incentives for investment in the same sorts of small higher-risk companies. Paragraph 6 of the schedule amends the rules of the CVS that apply where an investor receives value from the company. A receipt of value would normally cause some or all of the investor's tax relief to be withdrawn, but that will not happen if it is returned without delay.

Unfortunately, a minor drafting error in paragraph 6 removes some words in the existing legislation. We are grateful to the Institute of Chartered Accountants in England and Wales for alerting us to that unintended omission and are taking this opportunity to set things right. Amendment No. 6 merely reinstates the missing words, and I commend it to the Committee. Amendment No. 26 seeks to achieve the same result and would therefore result in a change that has already been made. I am grateful to the hon. Gentleman for ensuring this did not escape our intention and for the sake of expediency I ask him not press the amendment.

Mr Howard Flight (Arundel & South Downs, Conservative)

As the Minister said, amendments Nos. 6 and 26 are precisely the same drafting amendments. We are more than to happy to take the Government's drafting and not to press amendment No. 26. I cannot resist pointing out that we got it in first. But never mind, the aim is achieved.

Amendment agreed to.

Question proposed, That this schedule, as amended, be the 16th schedule to the Bill.

Mr Howard Flight (Arundel & South Downs, Conservative)

The relaxations in the schedule are welcomed by the Opposition and by the industry generally. Will the changes in the definition of qualifying investment resolve the outstanding issue that we touched on a year ago in Committee of enabling one VCT to take over another VCT? VCTs were set up six or seven years ago.

Sitting suspended for a Division in the House.

On resuming—

Mr Howard Flight (Arundel & South Downs, Conservative)

Before the suspension, I was making two points. First, Opposition Members and the industry broadly welcome the measures in schedule 16. Secondly, I was inquiring whether the changes to the definition of qualifying investments would accommodate the consolidation of the venture capital industry such that one venture capital trust could take over another. I think that I raised the issue in Committee last year.

The practical point is that venture capital trusts are five or six years old. Some will succeed, but some will not, and there is the inevitable commercial need for consolidation and for those that have not succeeded to be taken over and sorted out. As the definition stood, that was not possible. A share in a venture capital trust was not a qualifying investment, so one venture capital trust could not buy shares in another without losing its tax status. Does the legislation address that issue or do the Government intend to address it in other ways in due course?

Miss Melanie Johnson (Economic Secretary, HM Treasury; Welwyn Hatfield, Labour)

Following an amendment that the hon. Gentleman tabled last year, we asked the Inland Revenue to discuss with the VCT industry the issues arising when one VCT takes over or merges with another. It has since met an industry group several times and has made progress on identifying the changes that are needed to the rules. The Inland Revenue is still having discussions and will inform us of the outcome during the summer so that we can consider the most appropriate response. I assure the hon. Gentleman that his points are being taken seriously.

Mr Howard Flight (Arundel & South Downs, Conservative)

I thank the Minister for those comments; I am glad that the issue is in hand.

Question put and agreed to.

Schedule 16, as amended, agreed to.

Clause 65 ordered to stand part of the Bill.