Section 712: Meaning of “a major change in the nature or conduct of a trade or business”
2209.This interpretative section is based on section 767B of ICTA.
2210.Section 767B(7) of ICTA refers to section 245 of that Act. In repealing section 245 of ICTA, FA 1998 inadvertently omitted to make the necessary consequential amendment to section 767B(7) of ICTA.
2211.As it stood before its repeal, section 245(4)(a) of ICTA read:
“In subsection (1) above “a major change in the nature or conduct of a trade or business” includes –
(a)a major change in the type of property dealt in, or services or facilities provided, in the trade or business; or
(b)a major change in customers, outlets or markets of the trade or business; or
(c)a change whereby the company ceases to be a trading company and becomes an investment company or vice versa; or
(d)where the company is an investment company, a major change in the nature of the investments held by the company.”
2212.Before its repeal, section 245(5) of ICTA defined “trading company” and “investment company” for the purposes of that section:
““trading company” means a company whose business consists wholly or mainly of the carrying on of a trade or trades and
“investment company” means a company (other than a holding company) whose business consists wholly or mainly in the making of investments and the principal part of whose income is derived therefrom;
“holding company” means a company whose business consists wholly or mainly in the holding of shares or securities of companies which are its 90 per cent subsidiaries and which are trading companies.”
2213.Departmental practice in applying section 767B(7) of ICTA has not changed since 1998.
2214.If the repeal of section 245(4) of ICTA repealed section 767B(7) of that Act by implication, then it enabled the taxpayer to argue that a change which used to be mentioned in section 245(4) was not necessarily a major change in the nature or conduct of a trade or business.
2215.Section 245 of ICTA was one of a number of provisions repealed by Schedule 3 to FA 1998 as part of the abolition of advance corporation tax (ACT). It would be anomalous if, as part of the abolition of ACT, Parliament implicitly repealed section 767B(7) of ICTA and thereby weakened section 767A of that Act. It would be particularly anomalous if Parliament did this in FA 1998, since FA 1998 inserted section 767AA of ICTA to catch schemes which section 767A of that Act did not. In statutory interpretation, there is a presumption that Parliament wishes to avoid an anomalous result. Accordingly, the repeal of section 245 of ICTA did not by implication repeal section 767B(7) of that Act.
2216.Accordingly, this section draws on section 245 of ICTA (repealed) to rewrite section 767B(7) of ICTA.
