Finance Act 2000

The trading activities requirement U.K.

23 (1) The issuing company is not a qualifying issuing company in relation to the relevant shares unless it meets the trading activities requirement throughout the qualification period relating to those shares. U.K.

(2) The trading activities requirement in the case of a single company is that the company—

(a) disregarding any incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades, and

(b) is carrying on a qualifying trade or preparing to do so.

(3) The trading activities requirement in the case of a parent company is that—

(a) the business of the group does not consist wholly or as to a substantial part in the carrying on of non-qualifying activities, and

(b) [F1 the issuing company or a qualifying 90% subsidiary of the issuing company] —

(i) disregarding any incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades, and

(ii) is carrying on a qualifying trade or preparing to do so.

(4) For this purpose the business of the group means what would be the business of the group if the activities of the group companies taken together were regarded as one business.

(5) The requirement of sub-paragraph (2) or (3) is not met at any time by reason of the issuing company or [F2 a qualifying 90% subsidiary of the issuing company] preparing to carry on a qualifying trade if the company [F3 or a qualifying 90% subsidiary of the issuing company] does not begin to carry on the trade within two years after the issue of the relevant shares.

(6) For the purposes of determining whether [F4 a company] falls within sub-paragraph (2)(a) or (3)(b)(i), the purposes for which it exists shall be disregarded to the extent that they consist in the carrying on of the following activities—

(a) in the case of a single company, the holding and managing of property used by the company for one or more qualifying trades carried on by it,

(b) in the case of a group company, any activities within sub-paragraph (7)(a), (b) or (d), and

(c) in any case, the holding of shares to which investment relief is attributable, unless the holding of such shares amounts to a substantial part of the company’s business.

(7) For the purposes of determining the business of a group, activities of a group company shall be disregarded to the extent that they consist in—

(a) the holding of shares in or securities of, or the making of loans to, another group company;

(b) the holding and managing of property used by a group company for the purposes of one or more qualifying trades carried on by a group company;

(c) the holding of shares to which investment relief is attributable, unless the holding of such shares amounts to a substantial part of the company’s business, or

(d) incidental activities of a company which meets the trading activities requirement for a single company.

(8) In sub-paragraph (3)(a) “non-qualifying activities” means—

(a) excluded activities other than—

(i) the letting of ships to which paragraph 28 applies (ships other than [F5 offshore installations] or pleasure craft) in circumstances where the requirement of sub-paragraph (2) of that paragraph is met; or

(ii) the receiving of royalties or licence fees within paragraph 29 in circumstances where the requirements mentioned in sub-paragraph (2) of that paragraph are met; and

(b) activities carried on otherwise than in the course of a trade.

(9) In this paragraph—

(a) “incidental purposes” means purposes having no significant effect (other than in relation to incidental matters) on the extent of the activities of the company in question;

(b) “incidental activities” means activities carried on in pursuance of incidental purposes.

F6 (10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F7 (11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F1 Words in Sch. 15 para. 23(3)(b) substituted (22.7.2004) (with effect in accordance with Sch. 20 para. 15 of the amending Act) by Finance Act 2004 (c. 12), Sch. 20 para. 7(a)

F2 Words in Sch. 15 para. 23(5) substituted (22.7.2004) (with effect in accordance with Sch. 20 para. 15 of the amending Act) by Finance Act 2004 (c. 12), Sch. 20 para. 7(b)(i)

F3 Words in Sch. 15 para. 23(5) substituted (22.7.2004) (with effect in accordance with Sch. 20 para. 15 of the amending Act) by Finance Act 2004 (c. 12), Sch. 20 para. 7(b)(ii)

F4 Words in Sch. 15 para. 23(6) substituted (22.7.2004) (with effect in accordance with Sch. 20 para. 15 of the amending Act) by Finance Act 2004 (c. 12), Sch. 20 para. 7(c)

F5 Words in Sch. 15 para. 23(8)(a)(i) substituted (22.7.2004) (with effect in accordance with Sch. 27 para. 6(5)(6) of the amending Act) by Finance Act 2004 (c. 12), Sch. 27 para. 6(2)

F6 Sch. 15 para. 23(10) repealed (retrospective to 6.4.2007) by Finance Act 2007 (c. 11), Sch. 16 paras. 15(2), 18, Sch. 27 Pt. 2(16)

F7 Sch. 15 para. 23(11) repealed (retrospective to 6.4.2007) by Finance Act 2007 (c. 11), Sch. 16 paras. 15(2), 18, Sch. 27 Pt. 2(16)