Income Tax Act 2007

[F1 Interpretation U.K.

Textual Amendments

F1 Pt. 5A inserted (17.7.2012) (with effect in accordance with Sch. 6 para. 24(1) of the amending Act) by Finance Act 2012 (c. 14), Sch. 6 para. 1

257HF Meaning of “new qualifying trade” U.K.

(1) For the purposes of this Part a qualifying trade carried on by the issuing company or a qualifying 90% subsidiary of that company (“the relevant company”) is a “new qualifying trade” if (and only if)—

(a) the trade does not begin to be carried on (whether by the relevant company or any other person) before the [F2 three] year pre-investment period, and

(b) at no time before the relevant company begins to carry on the trade was any other trade being carried on by the issuing company or by any company that was a 51% subsidiary of the issuing company at the time in question.

(2) In this section—

• “qualifying trade” has the same meaning as in Part 5 (see sections 189 and 192 to 200);

• [F3 “three year pre-investment period” means the period of 3 years ending immediately before the day on which the relevant shares are issued.]

Textual Amendments

F2 Word in s. 257HF(1)(a) substituted (6.4.2023 in relation to shares issued on or after that date) by Finance Act 2023 (c. 30), s. 15(5)(a)(7)

F3 Words in s. 257HF(2) substituted (6.4.2023 in relation to shares issued on or after that date) by Finance Act 2023 (c. 30), s. 15(5)(b)(7)

257HG Meaning of “qualifying business activity” U.K.

(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 subsection (3).

(2) Activity A is—

(a) the carrying on of a new 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 new qualifying trade—

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

(ii) which is begun to be carried on by the company or such a subsidiary.

(3) 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 new qualifying trade which the company or such a subsidiary will carry on will be derived, or

(ii) that a new qualifying trade which the company or such a subsidiary is carrying on, or will carry on, will benefit.

(4) For the purposes of subsection (3)(a), when research and development is begun to be carried on by a qualifying 90% subsidiary of the issuing company, any carrying on of the research and development by it before it became such a subsidiary is ignored.

(5) References in subsection (2)(b)(i) or (3)(b) to a qualifying 90% subsidiary of the issuing company include references to any existing or future company which will be such a subsidiary at any future time.

257HH Meaning of “disposal of shares” U.K.

(1) In this Part references to a disposal of shares include a reference to a disposal of an interest or right in or over shares.

(2) An individual is to be treated, for the purposes of this Part, as disposing of any shares which the individual is treated by virtue of section 136 of TCGA 1992 as exchanging for other shares.

257HI Meaning of “issue of shares” U.K.

(1) In this Part—

(a) references (however expressed) to an issue of shares in any company are to such of the shares in the company as are of the same class and issued on the same day, and

(b) references (however expressed) to an issue of shares in any company to an individual are to such of the shares in the company as are of the same class and are issued to the individual in one capacity on the same day.

(2) Subsection (1)(b) has effect subject to sections 257E(6), 257EA(2), 257FB(2) and 257FK(1).

257HJ Minor definitions U.K.

(1) In this Part—

• “arrangements” includes any scheme, agreement, understanding, transaction or series of transactions (whether or not legally enforceable);

• “associate” has the same meaning as in Part 5 (see section 253);

• “bonus shares” means shares which are issued otherwise than for payment (whether in cash or otherwise);

• “director” is read in accordance with section 452 of CTA 2010;

• “EIS relief” means relief under Part 5;

• “group” means a parent company and its qualifying subsidiaries;

• “group company”, in relation to a group, means the parent company or any of its qualifying subsidiaries;

• “ordinary shares” means shares forming part of a company's ordinary share capital;

• “parent company” means a company that has one or more qualifying subsidiaries, and “single company” means a company that does not;

• “permanent establishment” has the same meaning as in Part 5 (see section 191A);

• “qualifying subsidiary” has the same meaning as in Part 5 (see section 191);

• “qualifying 90% subsidiary” has the same meaning as in Part 5 (see section 190);

• “research and development” has the meaning given by section 1006.

(2) Section 252 (meaning of a company being “in administration” or “in receivership”) applies for the purposes of this Part.

(3) Section 995 (control) does not apply for the purposes of the following provisions—

(a) section 257DG(1)(a),

(b) section 257FP,

(c) section 257FQ,

(d) section 257GH(4);

and in those provisions “control” is to be read in accordance with sections 450 and 451 of CTA 2010.

(4) In this Part—

(a) references in any provision to the reduction of any SEIS relief attributable to any shares include a reference—

(i) to the reduction of the relief to nil, and

(ii) if no relief has yet been obtained, to the reduction of the amount which apart from that provision would be the SEIS relief, and

(b) references to the withdrawal of SEIS relief in respect of any shares are—

(i) to the withdrawal of the SEIS relief attributable to those shares, or

(ii) if no relief has yet been obtained, to ceasing to be eligible for SEIS relief in respect of those shares.

(5) For the purposes of this Part shares in a company are not treated as being of the same class unless they would be so treated if dealt in on a recognised stock exchange.

(6) For the purposes of this Part the market value at any time of any asset is the price which it might reasonably be expected to fetch on a sale at that time in the open market free from any interest or right which exists by way of security in or over it.

(7) In this Part—

(a) references to SEIS relief obtained by an individual in respect of any shares include a reference to SEIS relief obtained by the individual in respect of those shares at any time after the individual has disposed of them, and

(b) references to the withdrawal or reduction of SEIS relief obtained by an individual in respect of any shares include a reference to the withdrawal or reduction of SEIS relief obtained by the individual in respect of those shares at any time.

(8) In the case of requirements that cannot be met until a future date, references in this Part to requirements being met for the time being are to nothing having occurred to prevent their being met.]