Income Tax Act 2007

179 Meaning of “qualifying business activity”

(1) In this Part “qualifying business activity”, in relation to the issuing company, means—

(a) activity A, or

(b) activity B,

if it is carried on by the company or a qualifying 90% subsidiary of the company.

This is subject to subsections (3) and (5).

(2) Activity A is—

(a) the carrying on of a qualifying trade which, on the date the relevant shares are issued, the company or a qualifying 90% subsidiary of the company is carrying on, or

(b) the activity of preparing to carry on (or preparing to carry on and then carrying on) a qualifying trade—

(i) which, on that date, is intended to be carried on wholly or mainly in the United Kingdom by the company or such a subsidiary, and

(ii) which is begun to be carried on by the company or such a subsidiary within two years after that date.

(3) But activity A is a qualifying business activity only if, at any time in period B when the qualifying trade is so carried on, the qualifying trade is carried on wholly or mainly in the United Kingdom.

(4) Activity B is the carrying on of research and development—

(a) which, on the date the relevant shares are issued, the company or a qualifying 90% subsidiary of the company is carrying on, or which the company or such a subsidiary begins to carry on immediately afterwards, and

(b) from which, on that date, it is intended—

(i) that a qualifying trade which the company or such a subsidiary will carry on wholly or mainly in the United Kingdom will be derived, or

(ii) that a qualifying trade which the company or such a subsidiary is carrying on, or will carry on, wholly or mainly in the United Kingdom will benefit.

(5) But activity B is a qualifying business activity only if, at any time in period B when—

(a) the research and development is carried on, or

(b) the qualifying trade which is derived, or which benefits or is intended to benefit, from the research and development is carried on,

the research and development or, as the case may be, the qualifying trade is carried on wholly or mainly in the United Kingdom.

(6) In determining—

(a) for the purposes of subsection (2)(b) when a qualifying trade is begun to be carried on by a qualifying 90% subsidiary of the company, or

(b) for the purposes of subsection (4)(a) when research and development is begun to be carried on by such a subsidiary,

any carrying on of the trade or, as the case may be, the research and development by it before it became such a subsidiary is ignored.

(7) References in subsection (2)(b)(i) or (4)(b) to a qualifying 90% subsidiary of the company include references to any existing or future company which will be such a subsidiary at any future time.