(1) This section applies if—
(a) a person makes a loss from the disposal or exercise of a right to receive an amount,
(b) the disposal or exercise is a transaction in a deposit under Chapter 11 of Part 4 of ITTOIA 2005 (see subsection (2)), and
(c) the person's total income for a tax year includes interest payable on the amount.
(2) The disposal or exercise is a transaction in a deposit under Chapter 11 of Part 4 of ITTOIA 2005 if, assuming there were a profit or gain from it, the profit or gain would be charged to tax under that Chapter.
(3) For the purposes of the giving of loss relief against relevant miscellaneous income for the loss mentioned in subsection (1)(a), the interest mentioned in subsection (1)(c) is treated as relevant miscellaneous income, for the tax year, in relation to the loss.
(1) Subsection (2) applies if—
(a) a person makes a loss in a relevant transaction, and
(b) that loss arises directly or indirectly in consequence of, or otherwise in connection with, relevant tax avoidance arrangements.
(2) The person is not to be given loss relief under section 152 for the loss.
(3) Subsection (4) applies if—
(a) a person has income on which income tax is chargeable under, or by virtue of, a relevant section 1016 provision, and
(b) that income arises directly or indirectly in consequence of, or otherwise in connection with, relevant tax avoidance arrangements.
(4) The person is not to be given loss relief against that income under section 152.
(5) In this section “relevant tax avoidance arrangements” means arrangements—
(a) to which the person is party, and
(b) the main purpose, or one of the main purposes, of which is to obtain a reduction in tax liability by means of loss relief under section 152.
(6) In subsection (5) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
(1) So far as a claim for loss relief against relevant miscellaneous income concerns the amount of the loss for a tax year, it must be made not more than 4 years after the end of the tax year.
(2) But—
(a) the question whether, and
(b) if so, how much,
loss relief against relevant miscellaneous income should be given for a tax year may be the subject of a separate claim made not more than 4 years after the end of the tax year.
(1) This Part provides for EIS income tax relief (“EIS relief”), that is, entitlement to tax reductions in respect of amounts subscribed by individuals for shares.
(2) In this Part “EIS” stands for the enterprise investment scheme.
(3) In accordance with section 1034(3), this Part has effect only in relation to shares issued on or after 6 April 2007.
This is subject to Schedule 2 (transitional provisions and savings).
(1) An individual (“the investor”) is eligible for EIS relief in respect of an amount subscribed by the investor on the investor's own behalf for an issue of shares in a company (“the issuing company”) if—
(za) the risk-to-capital condition is met (see section 157A),
(a) the shares (“the relevant shares”) are issued to the investor,
(aa) the shares are issued before 6 April 2035,
(b) the investor is a qualifying investor in relation to the relevant shares (see Chapter 2),
(c) the general requirements (including requirements as to the purpose of the issue of shares and the use of money raised) are met in respect of the relevant shares (see Chapter 3), and
(d) the issuing company is a qualifying company in relation to the relevant shares (see Chapter 4).
(1A) The Treasury may, by regulations, amend subsection (1)(aa) to substitute a different date for the date for the time being specified there.
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) The risk-to-capital condition is met if, having regard to all the circumstances existing at the time of the issue of the shares, it would be reasonable to conclude that—
(a) the issuing company has objectives to grow and develop its trade in the long-term, and
(b) there is a significant risk that there will be a loss of capital of an amount greater than the net investment return.
(2) For the purposes of subsection (1)(b)—
(a) the risk is to be determined by reference to a loss of capital, and the net investment return, for the investors generally,
(b) the reference to a loss of capital is to a loss of some or all of the amounts subscribed for the shares by the investors, and
(c) the reference to the net investment return is to the net investment return to the investors (whether by way of income or capital growth) taking into account the value of EIS relief.
(3) For the purposes of subsection (1) the circumstances to which regard may be had include—
(a) the extent to which the company's objectives include increasing the number of its employees or the turnover of its trade,
(b) the nature of the company's sources of income, including the extent to which there is a significant risk of the company not receiving some or all of the income,
(c) the extent to which the company has or is likely to have assets, or is or could become a party to arrangements for acquiring assets, that could be used to secure financing from any person,
(d) the extent to which the activities of the company are sub-contracted to persons who are not connected with it,
(e) the nature of the company's ownership structure or management structure, including the extent to which others participate in or devise the structure,
(f) how any opportunity for investment in the company is marketed, and
(g) the extent to which arrangements are in place under which opportunities for investments in the company are or may be marketed with, or otherwise associated with, opportunities for investments in other companies or entities.
(4) If the issuing company is a parent company—
(a) any reference in this section to the company's trade is to what would be the trade of the group if the activities of the group companies taken together were regarded as one trade, and
(b) any reference in subsection (3)(a) to (e) to the company is to any group company.
(1) If an individual—
(a) is eligible for EIS relief in respect of any amount subscribed for shares, and
(b) makes a claim in respect of all or some of the shares included in the issue,
the individual is entitled to a tax reduction for the tax year in which the shares were issued (“the current year”).
This is subject to the provisions of this Part.
(2) The amount of the tax reduction to which the individual is entitled is the amount equal to tax at the EIS rate for the current year on—
(a) the amount or, as the case may be, the sum of the amounts subscribed for shares issued in that year in respect of which the individual is eligible for and claims EIS relief (qualifying shares), or
(b) if less, the allowable amount.
(2ZA) The allowable amount is—
(a) if the qualifying shares do not include any KIC shares: £1 million;
(b) if the amount, or the sum of the amounts, subscribed for qualifying shares that are KIC shares is £1 million or more: £2 million;
(c) if neither paragraph (a) nor paragraph (b) applies: £1 million plus the amount, or the sum of the amounts, subscribed for qualifying shares that are KIC shares.
(2ZB) In subsection (2ZA) “KIC shares” means shares in a company which, or in companies each of which, is a knowledge-intensive company at the time the shares are issued (see section 252A and subsection (6)).
(2A) In this Part “the EIS rate” means 30%.
(3) The tax reduction is given effect at Step 6 of the calculation in section 23.
(4) ... if in the case of any issue of shares—
(a) which are issued ... in the current year, and
(b) in respect of the amount subscribed for which the individual is eligible for EIS relief,
the individual so claims, subsections (1) to (2ZB) apply as if, in respect of such part of that issue as may be specified in the claim, the shares had been issued in the preceding tax year; and the individual's liability to tax for both tax years is determined accordingly.
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) If the issuing company began to carry on a trade less than three years before the date the relevant shares are issued, section 252A as it applies for the purposes of this section has effect with the substitution of the following subsections for subsections (2) to (4A)—
(2) The first operating costs condition is that in at least one of the relevant three succeeding years at least 15% of the relevant operating costs constitute expenditure on research and development or innovation.
(3) The second operating costs condition is that in each of the relevant three succeeding years at least 10% of the relevant operating costs constitute such expenditure.
(4) In subsections (2) and (3)—
“relevant operating costs” means—
if the issuing company is a single company at the time the relevant shares are issued, the operating costs of that company, and
if the issuing company is a parent company at the time the relevant shares are issued, the sum of—
the operating costs of the issuing company, and
the operating costs of each company which is a qualifying subsidiary of the issuing company at that time, excluding a company's operating costs for any of the relevant three succeeding years during any part of which the company is not a qualifying subsidiary of the issuing company;
“the relevant three succeeding years” means the three consecutive years the first of which begins with the date the relevant shares are issued.
(7) In subsection (6) “trade” includes—
(a) any business or profession,
(b) so far as not within paragraph (a), the carrying on of research and development activities from which it is intended a trade will be derived or will benefit,
(c) preparing to carry on a trade.
(1) This section applies for the purposes of this Part in relation to any shares issued by a company.
(2) “Period A” means the period—
(a) beginning—
(i) with the incorporation of the company, or
(ii) if the company was incorporated more than two years before the date on which the shares were issued, two years before that date, and
(b) ending immediately before the termination date relating to the shares (see section 256).
(3) “Period B” means the period—
(a) beginning with the issue of the shares, and
(b) ending immediately before the termination date relating to the shares.
(4) “Period C” means the period—
(a) beginning 12 months before the issue of the shares, and
(b) ending immediately before the termination date relating to the shares.
In this Part—
(a) Chapter 5 provides for the attribution of EIS relief to shares and the making of claims for such relief,
(b) Chapter 6 provides for EIS relief to be withdrawn or reduced in the circumstances mentioned in that Chapter,
(c) Chapter 7 makes provision with respect to the procedure for the withdrawal or reduction of EIS relief, and
(d) Chapter 8 contains supplementary and general provisions.
(1) Chapter 6 of Part 4 (losses on disposal of shares) provides for relief against the income of an individual who incurs an allowable loss for capital gains tax purposes on a disposal of shares to which EIS relief is attributable.
(2) Subsection (3) of section 392 (loan to buy interest in close company) provides that subsection (2)(a) of that section does not apply if at any time—
(a) the individual by whom the shares are acquired, or
(b) that individual's spouse or civil partner,
makes a claim for EIS relief in respect of the shares.
(3) Section 150A of TCGA 1992 makes provision about gains or losses on the disposal of shares to which EIS relief is attributable.
(4) Schedule 5B to TCGA 1992 provides relief in respect of the re-investment under EIS of the proceeds of assets disposed of in circumstances where there would otherwise be a chargeable gain.
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The investor is a qualifying investor in relation to the relevant shares if the requirements of this Chapter are met as to—
(a) no connection with the issuing company (see section 163),
(b) no linked loans (see section 164), ...
(ba) existing shareholdings (see section 164A), and
(c) no tax avoidance (see section 165).
163 The no connection with the issuing company requirement
(1) The investor must not be connected with the issuing company (whether before or after its incorporation) at any time during the period—
(a) beginning two years before the issue of the shares, and
(b) ending immediately before the termination date relating to the shares.
(2) This is subject to section 169(1).
(1) No linked loan is to be made by any person, at any time in period A, to the investor or an associate of the investor.
(2) In this section “linked loan” means any loan which—
(a) would not have been made, or
(b) would not have been made on the same terms,
if the investor had not subscribed for the relevant shares, or had not been proposing to do so.
(3) References in this section to the making by any person of a loan to the investor or an associate of the investor include references—
(a) to the giving by that person of any credit to the investor or any associate of the investor, and
(b) to the assignment to that person of a debt due from the investor or any associate of the investor.
(1) If, at the time the relevant shares are issued, the investor holds any other shares in a company within subsection (2) (“C”), those other shares must be—
(a) a risk finance investment, or
(b) subscriber shares which—
(i) were issued to, and have since they were issued been continuously held by, the investor, or
(ii) were acquired by the investor at a time when C had not issued any shares other than subscriber shares and had not begun to carry on or make preparations for carrying on any trade or business.
(2) The companies referred to in subsection (1) are—
(a) the issuing company, and
(b) any company which is a qualifying subsidiary of the issuing company at the time the relevant shares are issued.
(3) Shares in a company are a “risk finance investment” if—
(a) they are issued by the company to the investor, and
(b) (at any time) the company provides a compliance statement under section 205, 257ED or 257PB in respect of the issue of shares which includes those shares.
The relevant shares must be subscribed for by the investor for genuine commercial reasons, and not as part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.
(1) For the purposes of this Chapter (except section 168(4)), an individual is connected with the issuing company if the individual or an associate of the individual is connected with that company under—
(a) section 167 (employees, directors and partners),
(b) section 170 (persons interested in capital etc of company), or
(c) section 171 (persons subscribing for shares under certain arrangements).
(1A) But see section 252A(12) for provision which disapplies section 168.
(2) See too section 257(2).
(1) An individual is connected with the issuing company if the individual—
(a) is an employee of—
(i) the issuing company,
(ii) any subsidiary of the issuing company, or
(iii) a partner of the issuing company or any of its subsidiaries,
(b) is a partner of—
(i) the issuing company, or
(ii) any subsidiary of the issuing company, or
(c) subject to section 168, is a director of—
(i) the issuing company,
(ii) any subsidiary of the issuing company, or
(iii) a company which is a partner of the issuing company or any of its subsidiaries.
(2) In subsection (1) “subsidiary”, in relation to the issuing company, means a company which at any time in period A is a 51% subsidiary of the issuing company, whether or not it is such a subsidiary while the individual or associate concerned is such an employee, partner or director as is mentioned in that subsection.
(3) For the purposes of this section and sections 168 and 169, in the case of an individual (“A”) who is both a director and an employee of a company—
(a) references (however expressed) to A in A's capacity as a director of the company include A in A's capacity as an employee of the company, but
(b) (apart from that) A is to be treated as a director, and not as an employee, of the company.
(1) An individual is not connected with the issuing company under section 167 merely because the individual, or an associate of the individual, is a director of that or another company unless the individual or associate (or a partnership of which the individual or associate is a member)—
(a) receives a payment from the issuing company or a related person during the period mentioned in section 163, or
(b) is entitled to receive such a payment in respect of that period or any part of it.
(2) For the purposes of subsection (1) the following are ignored—
(a) any payment or reimbursement of travelling or other expenses wholly, exclusively and necessarily incurred by the individual or an associate of the individual in the performance of the individual's or associate's duties as a director,
(b) any interest which represents no more than a reasonable commercial return on money lent to the issuing company or a related person,
(c) any dividend or other distribution which does not exceed a normal return on the investment,
(d) any payment for the supply of goods which does not exceed their market value,
(e) any payment of rent for any property occupied by the issuing company or a related person which does not exceed a reasonable and commercial rent for the property, and
(f) any necessary and reasonable remuneration which meets the conditions in subsection (3).
(3) The conditions are that the remuneration—
(a) is paid for services rendered to the issuing company or related person in the course of a trade or profession carried on wholly or partly in the United Kingdom (not being secretarial or managerial services or services of a kind provided by the person to whom they are rendered), and
(b) is taken into account in calculating for tax purposes the profits of that trade or profession.
(4) In this section—
(a) “related person”, in relation to the issuing company, means—
(i) any company of which the individual or an associate of the individual is a director and which is a subsidiary or partner of the issuing company, or a partner of a subsidiary of the issuing company, and
(ii) any person connected with the issuing company or with a company falling within sub-paragraph (i), and
(b) any reference to a payment to an individual includes a payment made to the individual indirectly or to the individual's order or for the individual's benefit.
(5) In this section and section 169 “subsidiary”, in relation to the issuing company, means a company which at any time in period A is a 51% subsidiary of the issuing company.
169 Directors qualifying for relief despite connection
(1) Section 163(1) does not prevent the investor from being a qualifying investor despite the investor's connection with the issuing company at any time in period A relating to the relevant shares if—
(a) the investor is connected with that company merely because of the investor, or the investor's associate—
(i) being a director of, or of a company which is a partner of, the issuing company or a subsidiary of the issuing company, and
(ii) being in receipt of, or entitled to receive, remuneration as such, and
(b) conditions A and B and (where applicable) condition C are met.
(2) Condition A is that, in relation to the director (“D”), whether D is the investor or an associate of the investor—
(a) D's remuneration, or
(b) the remuneration to which D is entitled,
consists only of remuneration which is reasonable remuneration for services rendered to the company of which D is a director in D's capacity as such.
(3) Condition B is that the investor was issued with the relevant shares, or a previous issue of shares in the issuing company which meet the requirements of section 173(2), at a time when the investor had never been—
(a) connected with the issuing company, or
(b) involved in carrying on (whether on the investor's own account or as a partner, director or employee) the whole or any part of the trade, business or profession carried on by the issuing company or a subsidiary of that company.
(4) Condition C is that, if the issue of the relevant shares did not meet condition B, they were issued before —
(a) the termination date relating to the latest issue of shares which met that condition, or
(b) if that issue is an issue in respect of which the investor is eligible for SEIS relief (within the meaning of Part 5A), before the date specified in section 257AC(4) in relation to the shares.
(5) For the purposes of condition A any necessary and reasonable remuneration falling within section 168(2)(f) is to be left out of account.
(6) In this section “remuneration” includes any benefit or facility.
(1) An individual is connected with the issuing company if the individual directly or indirectly possesses or is entitled to acquire more than 30% of—
(a) the ordinary share capital of the company or any subsidiary of the company,
(b) the ... issued share capital of the company or any such subsidiary, or
(c) the voting power in the company or any such subsidiary.
(2) An individual is connected with the issuing company if the individual directly or indirectly possesses or is entitled to acquire such rights as would—
(a) in the event of the winding up of the company or any subsidiary of the company, or
(b) in any other circumstances,
entitle the individual to receive more than 30% of the assets of the company or subsidiary (“the company in question”) which would then be available for distribution to equity holders of the company in question.
(3) For the purposes of subsection (2)—
(a) the persons who are equity holders of the company in question, and
(b) the percentage of the assets of the company in question to which the individual would be entitled,
are determined in accordance with Chapter 6 of Part 5 of CTA 2010.
(4) In making that determination—
(a) references in section 166 of that Act to company A are to be read as references to an equity holder, and
(b) references in that section to a winding up are to be read as including references to any other circumstances in which assets of the company in question are available for distribution to its equity holders.
(5) An individual is not connected with a company merely because one or more shares in the company are held by the individual or by an associate of the individual, at a time when the company—
(a) has not issued any shares other than subscriber shares, and
(b) has not begun to carry on, or make preparations for carrying on, any trade or business.
(6) An individual is connected with the issuing company if the individual has control of the issuing company or of any subsidiary of that company.
(7) In this section “subsidiary”, in relation to the issuing company, means a company which at any time in period A is a 51% subsidiary of the issuing company, whether or not it is such a subsidiary while the individual concerned has, or is entitled to acquire, such capital, voting power, rights or control as are mentioned in this section.
(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9) For the purposes of this section—
(a) an individual is treated as entitled to acquire anything which the individual is entitled to acquire at a future date or will at a future date be entitled to acquire, and
(b) there is attributed to any individual any rights or powers of any other person who is an associate of the individual.
(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
171 Persons subscribing for shares under certain arrangements
(1) This section applies if an individual (“A”) subscribes for shares in a company (“the company”) with which A is not connected under section 167 or 170.
(2) If—
(a) A subscribes for the shares as part of an arrangement, and
(b) the arrangement provides for another person to subscribe for shares in another company with which (assuming it to be the issuing company) A, or any other individual who is a party to the arrangement, is connected,
A is connected with the company under this section.
The general requirements are met in respect of the relevant shares if the requirements of this Chapter are met as to—
(a) the shares (see section 173),
(aa) the maximum amount raised annually through risk finance investments (see section 173A),
(aaa) the maximum risk finance investments at the issue date (see section 173AA),
(aab) the maximum risk finance investments at times during period B (see section 173AB),
(ab) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) the purpose of the issue (see section 174),
(c) the use of the money raised (see section 175),
(ca) the permitted maximum age (see section 175A),
(d) the minimum period (see section 176),
(e) no pre-arranged exits (see section 177), and
(f) no tax avoidance (see section 178), and
(g) no disqualifying arrangements (see section 178A).
(1) The relevant shares must meet—
(a) the requirements of subsection (2), and
(b) unless they are bonus shares, the requirements of subsection (3).
(2) Shares meet the requirements of this subsection if they are ordinary shares which do not, at any time during period B, carry—
(a) any present or future preferential right to dividends that is within subsection (2A),
(aa) any present or future preferential right to a company's assets on its winding up, or
(b) any present or future right to be redeemed.
(2A) A preferential right to dividends carried by a share in a company is within this subsection if—
(a) the amount of any dividends payable pursuant to the right, or the date or dates on which they are payable, depend to any extent on a decision of the company, the holder of the share or any other person, or
(b) the amount of any dividends that become payable at any time pursuant to the right includes any amount that became payable at any earlier time pursuant to the right, but has not been paid.
(3) Shares meet the requirements of this subsection if they—
(a) are subscribed for wholly in cash, and
(b) are fully paid up at the time they are issued.
(4) Shares are not fully paid up for the purposes of subsection (3)(b) if there is any undertaking to pay cash to any person at a future date in respect of the acquisition of the shares.
173A The maximum amount raised annually through risk finance investments requirement
(1) The total amount of relevant investments made in the issuing company in the year ending with the date the relevant shares are issued must not exceed—
(a) if at that date the issuing company is a knowledge-intensive company (see section 252A and subsection (5A)) and—
(i) not a specified Northern Ireland company, £20 million;
(ii) a specified Northern Ireland company, £10 million, and
(b) if at that date the issuing company is not a knowledge-intensive company and—
(i) not a specified Northern Ireland company, £10 million;
(ii) a specified Northern Ireland company, £5 million.
(2) In subsection (1), the reference to relevant investments made in the issuing company includes—
(a) a relevant investment made in any company that has at any time in the year mentioned there been a 51% subsidiary of the issuing company (including investments made in such a company before it became such a subsidiary but, if it is not such a subsidiary at the end of that year, not those made after it last ceased to be such a subsidiary),
(b) any other relevant investment made in a company to the extent that the money raised by the investment has been employed for the purposes of a trade carried on by another company that has at any time in that year been a 51% subsidiary of the issuing company (but, if it is not such a subsidiary at the end of that year, ignoring any money so employed after it last ceased to be such a subsidiary), and
(c) any other relevant investment made in a company if—
(i) the money raised by the investment has been employed for the purposes of a trade carried on by that company or another person, and
(ii) in that year, after the investment was made, the trade (or a part of it) became a relevant transferred trade (see subsection (2B)).
(2A) If only a proportion of the money raised by a relevant investment is employed for the purposes of a trade which becomes a relevant transferred trade, the reference in subsection (2)(c) to the relevant investment is to be read as a reference to the corresponding proportion of that investment.
(2B) Where—
(a) in the year mentioned in subsection (1) a trade is transferred—
(i) to the issuing company,
(ii) to a company that has at any time during that year been a 51% subsidiary of the issuing company, or
(iii) to a partnership of which a company within sub-paragraph (i) or (ii) is a member,
(including where it is transferred to a company within sub-paragraph (ii), or a partnership of which such a company is a member, in that year before the company became such a subsidiary but, if the company is not such a subsidiary at the end of that year, not where it is transferred to such a company or partnership after the company last ceased to be such a subsidiary), and
(b) that trade or a part of it was previously (at any time) carried on by another person,
the trade or part mentioned in paragraph (b) becomes a “ relevant transferred trade ” at the time it is transferred as mentioned in paragraph (a).
(3) A “relevant investment” is made in a company if—
(a) an investment (of any kind) in the company is made by a VCT , or
(b) the company issues shares (money having been subscribed for them), and (at any time) the company provides—
(i) a compliance statement under section 205, or
(ia) a compliance statement under section 257ED (seed enterprise investment scheme).
(ii) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
in respect of the shares, or
(ba) an investment is made in the company and (at any time) the company provides a compliance statement under section 257PB (tax relief for social investments) in respect of the investment, or
(c) any other investment is made in the company which is aid received by it pursuant to a measure approved by the European Commission before IP completion day as compatible with Article 107 of the Treaty on the Functioning of the European Union in accordance with the principles laid down in the European Commission's Guidelines on State aid to promote risk finance investment (as those guidelines had effect at the time of the approval).
(4) An investment within subsection (3)(b) is regarded as made when the shares are issued.
(5) Section 257KB applies in determining for those purposes when an investment within subsection (3)(ba) is made as it applies for the purposes of Part 5B (tax relief on social investments).
(5A) If the issuing company began to carry on a trade less than three years before the date the relevant shares are issued, section 252A as it applies for the purposes of this section has effect with the substitution of the following subsections for subsections (2) to (4A)—
(2) The first operating costs condition is that in at least one of the relevant three succeeding years at least 15% of the relevant operating costs constitute expenditure on research and development or innovation.
(3) The second operating costs condition is that in each of the relevant three succeeding years at least 10% of the relevant operating costs constitute such expenditure.
(4) In subsections (2) and (3)—
“relevant operating costs” means—
if the issuing company is a single company at the time the relevant shares are issued, the operating costs of that company, and
if the issuing company is a parent company at the time the relevant shares are issued, the sum of—
the operating costs of the issuing company, and
the operating costs of each company which is a qualifying subsidiary of the issuing company at that time, excluding a company's operating costs for any of the relevant three succeeding years during any part of which the company is not a qualifying subsidiary of the issuing company;
“the relevant three succeeding years” means the three consecutive years the first of which begins with the date the relevant shares are issued.
(6) For the purposes of this section—
(a) references to a trade include a part of a trade (and references to the carrying on of a trade are to be construed accordingly);
(b) when determining the amount of money raised by a relevant investment which has been employed for the purposes of a trade such apportionments are to be made as are just and reasonable.
(7) In this section “trade” includes—
(a) any business or profession,
(b) so far as not within paragraph (a), the carrying on of research and development activities from which it is intended a trade will be derived or will benefit, and
(c) preparing to carry on a trade.
173AA Maximum risk finance investments at the issue date requirement
(1) The total amount of relevant investments made in the issuing company on or before the issue date must not exceed—
(a) if at the issue date the issuing company is a knowledge-intensive company (see section 252A) and—
(i) not a specified Northern Ireland company, £40 million;
(ii) a specified Northern Ireland company, £20 million, and
(b) if at the issue date the issuing company is not a knowledge-intensive company and—
(i) not a specified Northern Ireland company, £24 million;
(ii) a specified Northern Ireland company, £12 million.
(2) In subsection (1) the reference to relevant investments made in the issuing company includes—
(a) any relevant investment made in any company that at the issue date is, or has at any time before that date been, a 51% subsidiary of the issuing company (including investments made in such a company before it became such a subsidiary but, if it is not such a subsidiary at the issue date, not investments made in it after it last ceased to be such a subsidiary),
(b) any other relevant investment made in a company to the extent that the money raised by the investment has been employed for the purposes of a trade carried on by another company that has at any time before the issue date been a 51% subsidiary of the issuing company (but, if it is not such a subsidiary at that date, ignoring any money so employed after it last ceased to be such a subsidiary), and
(c) any other relevant investment made in a company if—
(i) the money raised by the investment has been employed for the purposes of a trade carried on by that company or another person, and
(ii) after the investment was made, but on or before the issue date, that trade became a relevant transferred trade (see subsection (4)).
(3) If only a proportion of the money raised by a relevant investment is employed for the purposes of a trade which becomes a relevant transferred trade, the reference in subsection (2)(c) to the relevant investment is to be read as a reference to the corresponding proportion of that investment.
(4) Where—
(a) at any time on or before the issue date, a trade is transferred—
(i) to the issuing company,
(ii) to a company that at the issue date is, or has at any time before that date been, a 51% subsidiary of the issuing company, or
(iii) to a partnership of which a company within sub-paragraph (i) or (ii) is a member,
(including where it is transferred to a company within sub-paragraph (ii), or a partnership of which such a company is a member, before the company became such a subsidiary but, if the company is not such a subsidiary at the issue date, not where it is transferred to such a company or partnership after the company last ceased to be such a subsidiary), and
(b) the trade or a part of it was previously (at any time) carried on by another person,
the trade or part mentioned in paragraph (b) becomes a “ relevant transferred trade ” at the time it is transferred as mentioned in paragraph (a).
(5) In this section—
“the issue date” means the date on which the relevant shares are issued;
“relevant investment” has the meaning given by section 173A(3), and section 173A(4) and (5) (which determines when certain investments are made) applies for the purposes of this section;
and section 173A(6) and (7) (meaning of “trade” etc) applies for the purposes of this section as it applies for the purposes of section 173A.
173AB Maximum risk finance investments during period B requirement
(1) The requirement of this section applies if condition A or B is met.
(2) Condition A is that—
(a) a company becomes a 51% subsidiary of the issuing company at any time during period B,
(b) all or part of the money raised by the issue of the relevant shares is employed for the purposes of a qualifying business activity which consists wholly or in part of a trade carried on by that company, and
(c) that trade (or a part of it) was carried on by that company before it became a 51% subsidiary as mentioned in paragraph (a).
(3) Condition B is that all or part of the money raised by the issue of the relevant shares is employed for the purposes of a qualifying business activity which consists wholly or in part of a trade which, during period B, becomes a relevant transferred trade.
(4) The requirement of this section is that, at all times in period B, the total of the relevant investments made in the issuing company before the time in question (“the relevant time”) must not exceed—
(a) if at the issue date the issuing company is a knowledge-intensive company (see section 252A) and—
(i) not a specified Northern Ireland company, £40 million;
(ii) a specified Northern Ireland company, £20 million, and
(b) if at the issue date the issuing company is not a knowledge-intensive company and—
(i) not a specified Northern Ireland company, £24 million;
(ii) a specified Northern Ireland company, £12 million.
(5) In subsection (4) the reference to relevant investments made in the issuing company includes—
(a) any relevant investment made in any company that at any time before the relevant time has been a 51% subsidiary of the issuing company (including investments made in a company before it became such a subsidiary but, if it is not such a subsidiary at the relevant time, not investments made in it after it last ceased to be such a subsidiary),
(b) any other relevant investment made in a company to the extent that the money raised by the investment has been employed for the purposes of a trade carried on by another company that has at any time before the relevant time been a 51% subsidiary of the issuing company (but, if it is not such a subsidiary at the relevant time, ignoring any money so employed after it last ceased to be such a subsidiary), and
(c) any other relevant investments made in a company where—
(i) the money raised by the investment has been employed for the purposes of a trade carried on by that company or another person, and
(ii) after the investment was made, but before the relevant time, that trade (or a part of it) becomes a relevant transferred trade (see subsection (7)).
(6) If only a proportion of the money raised by a relevant investment is employed for the purposes of a trade which became a relevant transferred trade, the reference in subsection (5)(c) to the relevant investment is to be read as a reference to the corresponding proportion of that investment.
(7) Where—
(a) before the relevant time, a trade is transferred—
(i) to the issuing company,
(ii) to a company that is at the relevant time, or has before that time been, a 51% subsidiary of the issuing company, or
(iii) to a partnership of which a company within sub-paragraph (i) or (ii) is a member,
(including where it is transferred to a company within sub-paragraph (ii), or a partnership of which such a company is a member, before the company became such a subsidiary but, if the company is not such a subsidiary at the relevant time, not where it is transferred to such a company or partnership after the company last ceased to be such a subsidiary), and
(b) the trade or a part of it was previously (at any time) carried on by another person,
the trade or part mentioned in paragraph (b) becomes a “ relevant transferred trade ” at the time it is transferred as mentioned in paragraph (a).
(8) In this section—
“the issue date” means the date on which the relevant shares are issued, and
“relevant investment” has the meaning given by section 173A(3), and section 173A(4) and (5) (which determines when certain investments are made) applies for the purposes of this section;
and section 173A(6) and (7) (meaning of “trade” etc) applies for the purposes of this section as it applies for the purposes of section 173A.
(1) The relevant shares (other than any of them which are bonus shares) must be issued in order to raise money for the purpose of a qualifying business activity so as to promote business growth and development.
(2) For this purpose “business growth and development” means the growth and development of—
(a) if the issuing company is a single company, the business of that company, and
(b) if the issuing company is a parent company, what would be the business of the group if the activities of the group companies taken together were regarded as one business.
(1) A requirement of this section is that all of the money raised by the issue of the relevant shares (other than any of them which are bonus shares) is, no later than the time mentioned in subsection (3), employed wholly for the purpose of the qualifying business activity for which it was raised.
(1ZA) Employing money raised by the issue of the relevant shares (whether on its own or together with other money) on the acquisition, directly or indirectly, of—
(a) an interest in another company such that a company becomes a 51% subsidiary of the issuing company,
(b) a further interest in a company which is a 51% subsidiary of the issuing company,
(c) a trade,
(d) intangible assets employed for the purposes of a trade, or
(e) goodwill employed for the purposes of a trade,
does not amount to employing that money for the purposes of a qualifying business activity.
(1ZB) The Treasury may by regulations provide that subsection (1ZA) does not apply in relation to acquisitions of intangible assets which are of a description specified, or which occur in circumstances specified, in the regulations.
(1ZC) For the purposes of subsections (1ZA) and (1ZB)—
“goodwill” has the same meaning as in Part 8 of CTA 2009 (see section 715(3));
“intangible assets” means any asset which falls to be treated as an intangible asset in accordance with generally accepted accountancy practice;
and section 173A(6) and (7) (meaning of “trade” etc) applies as it applies for the purposes of section 173A.
(1A) Also, otherwise employing money on the acquisition of shares or stock in a company does not of itself amount to employing the money for the purposes of a qualifying business activity.
(1B) Another requirement of this section is that, of the money raised by the issue of the relevant shares (other than any of them which are bonus shares), only such part of that money as could have been raised by an issue of shares falling within subsection (1C) is employed for the purposes of a qualifying business activity that is carried on by one or more specified Northern Ireland companies.
(1C) Shares fall within this subsection if the general requirements referred to in section 172 as they apply in relation to shares issued by a specified Northern Ireland company are met in respect of them.
(2) The requirement in subsection (1) does not fail to be met merely because an amount of money which is not significant is employed for another purpose.
(3) The time referred to in subsection (1) is—
(a) the end of the period of two years beginning with the issue of the shares, or
(b) in the case of money raised only for the purpose of an activity to which section 179(2) applies, the end of the period of two years beginning with—
(i) the issue of the shares, or
(ii) if later, the time when the company or a qualifying 90% subsidiary of the company begins to carry on the qualifying trade.
(4) In determining for the purposes of subsection (3)(b) when a qualifying trade is begun to be carried on by a qualifying 90% subsidiary of a company, any carrying on by it of the trade before it became such a subsidiary is ignored.
(1) The requirement of this section is that, if the relevant shares are issued after the initial investing period, condition A, B or C must be met.
(2) “The initial investing period” means—
(a) where the issuing company is a knowledge-intensive company at the issue date, the period of 10 years beginning with—
(i) the relevant first commercial sale, or
(ii) if the issuing company so elects, the date by reference to which that company is treated as reaching an annual turnover of £200,000 (see section 252B), and
(b) in any other case, the period of 7 years beginning with that sale.
(3) Condition A is that—
(a) a relevant investment was made in the issuing company before the end of the initial investing period, and
(b) some or all of the money raised by that investment was employed for the purposes of the relevant qualifying business activity (or a part of it).
(4) Condition B is that—
(a) the total amount of relevant investments made in the issuing company in a period of 30 consecutive days which includes the issue date is at least 50% of the average turnover amount, and
(b) the money raised by those investments is employed for the purpose of entering a new product or geographical market.
(5) Condition C is that—
(a) condition B in subsection (4) or condition B in section 294A(4) (VCT: permitted company age requirement) was previously met in relation to one or more relevant investments made in the issuing company, and
(b) some or all of the money raised by those investments was employed for the purposes of the relevant qualifying business activity.
(6) “The relevant first commercial sale” means the earliest of the following—
(a) the first commercial sale made by the issuing company;
(b) the first commercial sale made by a company that is at the issue date, or before that date has been, a 51% subsidiary of the issuing company (including a sale made by a company before it became such a subsidiary but, if it is not such a subsidiary at the issue date, not a sale made after it last ceased to be such a subsidiary);
(c) the first commercial sale made by any person who previously (at any time) carried on a trade which was subsequently carried on, on or before the issue date, by—
(i) the issuing company, or
(ii) a company that is at the issue date, or before that date has been, a 51% subsidiary of the issuing company,
(including a trade subsequently carried on by such a company before it became such a subsidiary but, if it is not such a subsidiary at the issue date, not a trade which it carried on only after it last ceased to be such a subsidiary);
(d) the first commercial sale made by a company which becomes a 51% subsidiary of the issuing company after the issue date in circumstances where all or part of the money raised by the issue of the relevant shares is employed for the purposes of an activity carried on by that subsidiary (including a sale made by such a company before it became such a subsidiary);
(e) the first commercial sale made by any person who previously (at any time) carried on a trade which was subsequently carried on by a company mentioned in paragraph (d) (including a trade carried on by such a company before it became such a subsidiary);
(f) if the money raised by the issue of the relevant shares (or any part of it) is employed for the purposes of a trade which has been transferred, after the issue date, to the issuing company or a 51% subsidiary of that company (or a partnership of which the issuing company or such a subsidiary is a member), having previously (at any time) been carried on by another person, the first commercial sale made by that other person.
(7) “The average turnover amount” means one fifth of the total relevant turnover amount for the relevant five year period.
(7A) Subject to subsection (7B), the relevant five year period is the five year period which ends immediately before the beginning of the last accounts filing period.
(7B) If the last accounts filing period ends more than 12 months before the issue date, the relevant five year period is the five year period which ends 12 months before the issue date.
(8) In this section—
“entering a new product or geographical market” has the same meaning as in Commission Regulation (EU) No 651/2014 (General block exemption Regulation) as it had effect in the United Kingdom immediately before IP completion day;
“first commercial sale” has the same meaning as in the European Commission's Guidelines on State aid to promote risk finance investments (as those guidelines had effect in the United Kingdom immediately before IP completion day);
“the issue date” means the date on which the relevant shares are issued;
“the last accounts filing period” means the last period for filing (within the meaning of section 442 of the Companies Act 2006) for the issuing company which ends before the date on which the relevant shares are issued;
“relevant investment” has the meaning given by section 173A(3), and section 173A(4) and (5) (which determines when certain investments are made) applies for the purposes of this section;
“relevant qualifying business activity” means the qualifying business activity for which the money raised by the issue of the relevant shares is employed;
“the total relevant turnover amount” for a period is—
if the issuing company is a single company at the issue date, the sum of—
the issuing company's turnover for that period,
if all or part of the money raised by the issue of the relevant shares is employed for the purposes of an activity carried on by a company which becomes a 51% subsidiary of the issuing company after the issue date, the turnover for that period of that subsidiary (or, if there is more than one, each of them), and
if all or part of the money raised by the issue of the relevant shares is employed for the purposes of a transferred trade, the turnover of that trade for so much of that period as falls before the trade became a transferred trade (except to the extent that it is already included in calculating the amounts within sub-paragraphs (i) and (ii));
if the issuing company is a parent company at the issue date, the sum of—
the issuing company's turnover for that period,
the turnover for that period of each company which at the issue date is a qualifying subsidiary of the issuing company,
if all or part of the money raised by the issue of the relevant shares is employed for the purposes of an activity carried on by a company which becomes a 51% subsidiary of the issuing company after the issue date, the turnover for that period of that subsidiary (or, if there is more than one, each of them), and
if all or part of the money raised by the issue of the relevant shares is employed for the purposes of a transferred trade, the turnover of that trade for so much of that period as falls before the trade became a transferred trade (except to the extent that it is already included in calculating the amounts within sub-paragraphs (i) to (iii));
“transferred trade” means a trade which has been transferred to the company which is carrying on the trade at the time the money raised by the issue of the relevant shares is employed or to a partnership of which that company is a member;
“turnover”—
in relation to a company, has the meaning given by section 474(1) of the Companies Act 2006 and is to be determined by reference to the accounts of companies and amounts recognised for accounting purposes (and such apportionments of those amounts as are just and reasonable are to be made for the purpose of determining a company's turnover for a period);
in relation to any other person carrying on a trade, also has the meaning given by section 474(1) of that Act (reading references in that provision to a company as references to the person) and is to be determined by reference to the accounts of the person and amounts recognised for accounting purposes (and such apportionments of those amounts as are just and reasonable are to be made for the purpose of determining a person's turnover for a period);
in relation to a transferred trade carried on by a company or other person, means such proportion of the turnover of the company or other person as it is just and reasonable to attribute to the transferred trade;
and section 173A(6) and (7) (meaning of “trade” etc) applies for the purposes of this section as it applies for the purposes of section 173A.
(1) The issue of shares which includes the relevant shares must meet—
(a) the requirement of subsection (2) in a case where the money raised by an issue of shares is raised wholly for the purpose of a qualifying business activity falling within section 179(2),
(b) the requirement of subsection (3) in a case where the money raised by an issue of shares is raised wholly or partly for the purpose of a qualifying business activity falling within section 179(4).
(2) The requirement is that—
(a) the trade concerned must have been carried on for a period of at least 4 months ending at or after the time of the issue, and
(b) throughout that period—
(i) the trade must have been carried on by the issuing company or a qualifying 90% subsidiary of that company, and
(ii) the trade must not have been carried on by any other person.
(3) The requirement is that—
(a) the research and development concerned must have been carried on for a period of at least 4 months ending at or after the time of the issue, and
(b) throughout that period—
(i) the research and development must have been carried on by the issuing company or a qualifying 90% subsidiary of that company, and
(ii) the research and development must not have been carried on by any other person.
(4) If—
(a) merely because of the issuing company or any other company being wound up, or dissolved without winding up—
(i) the trade is carried on as mentioned in subsection (2), or
(ii) the research and development is carried on as mentioned in subsection (3),
for a period shorter than 4 months, and
(b) the winding up or dissolution—
(i) is for genuine commercial reasons, and
(ii) is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax,
subsection (2) or, as the case may be, (3) has effect as if it referred to that shorter period.
(5) If—
(a) merely because of anything done as a result of the issuing company or any other company being in administration or receivership—
(i) the trade is carried on as mentioned in subsection (2), or
(ii) the research and development is carried on as mentioned in subsection (3),
for a period shorter than 4 months, and
(b) the entry into administration or receivership, and everything done as a result of the company concerned being in administration or receivership—
(i) is for genuine commercial reasons, and
(ii) is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax,
subsection (2) or, as the case may be, (3) has effect as if it referred to that shorter period.
(1) The issuing arrangements for the relevant shares must not include—
(a) arrangements with a view to the subsequent repurchase, exchange or other disposal of those shares or of other shares in or securities of the issuing company,
(b) arrangements for or with a view to the cessation of any trade which is being or is to be or may be carried on by the issuing company or a person connected with that company,
(c) arrangements for the disposal of, or of a substantial amount (in terms of value) of, the assets of the issuing company or of a person connected with that company, or
(d) arrangements the main purpose or one of the main purposes of which is (by means of any insurance, indemnity or guarantee or otherwise) to provide partial or complete protection for persons investing in shares in the issuing company against what would otherwise be the risks attached to making the investment.
(2) The arrangements referred to in subsection (1)(a) do not include—
(a) any arrangements with a view to such an exchange of shares, or shares and securities, as is mentioned in section 247(1), or
(b) any arrangements with a view to any shares in the issuing company being exchanged for, or converted into, shares in that company of a different class.
(3) The arrangements referred to in subsection (1)(b) and (c) do not include any arrangements applicable only on the winding up of a company except in a case where—
(a) the issuing arrangements include arrangements for the company to be wound up, or
(b) the arrangements are applicable on the winding up of the company otherwise than for genuine commercial reasons.
(4) The arrangements referred to in subsection (1)(d) do not include any arrangements which are confined to the provision—
(a) for the issuing company itself, or
(b) if the issuing company is a parent company that meets the trading requirement in section 181(2)(b), for the issuing company itself, for the issuing company itself and one or more of its subsidiaries or for one or more of its subsidiaries,
of any such protection against the risks arising in the course of carrying on its business as might reasonably be expected to be provided in normal commercial circumstances.
(5) In this section “the issuing arrangements” means—
(a) the arrangements under which the shares are issued to the individual, and
(b) any arrangements made before the issue of the shares to the individual in relation to or in connection with that issue.
The relevant shares must be issued for genuine commercial reasons, and not as part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.
178A The no disqualifying arrangements requirement
(1) The relevant shares must not be issued, nor any money raised by the issue employed, in consequence or anticipation of, or otherwise in connection with, disqualifying arrangements.
(2) Arrangements are “disqualifying arrangements” if—
(a) the main purpose, or one of the main purposes, of the arrangements is to secure—
(i) that a qualifying business activity is or will be carried on by the issuing company or a qualifying 90% subsidiary of that company, and
(ii) that one or more persons (whether or not including any party to the arrangements) may obtain relevant tax relief in respect of shares issued by the issuing company which raise money for the purposes of that activity or that such shares may comprise part of the qualifying holdings of a VCT,
(b) that activity is the relevant qualifying business activity, and
(c) one or both of conditions A and B are met.
(3) Condition A is that, as a (direct or indirect) result of the money raised by the issue of the relevant shares being employed as required by section 175, an amount representing the whole or the majority of the amount raised is, in the course of the arrangements, paid to or for the benefit of a relevant person or relevant persons.
(4) Condition B is that, in the absence of the arrangements, it would have been reasonable to expect that the whole or greater part of the component activities of the relevant qualifying business activity would have been carried on as part of another business by a relevant person or relevant persons.
(5) For the purposes of this section it is immaterial whether the issuing company is a party to the arrangements.
(6) In this section—
“component activities” means—
if the relevant qualifying business activity is activity A (see section 179(2)), the carrying on of a qualifying trade or preparing to carry on such a trade, which constitutes that activity, and
if the relevant qualifying business activity is activity B (see section 179(4)), the carrying on of research and development which constitutes that activity;
“qualifying holdings”, in relation to the issuing company, is to be construed in accordance with section 286 (VCTs: qualifying holdings);
“relevant person” means a person who is a party to the arrangements or a person connected with such a party;
“relevant qualifying business activity” means the activity for the purposes of which the issue of the relevant shares raised money;
“relevant tax relief”, in respect of shares, means one or more of the following—
EIS relief in respect of the shares;
SEIS relief under Part 5A in respect of the shares;
SI relief under Part 5B in respect of the shares;
relief under Chapter 6 of Part 4 (losses on disposal of shares) in respect of the shares;
relief under section 150A or 150E of TCGA 1992 (enterprise investment scheme) in respect of the shares;
relief under Schedule 5B to that Act (enterprise investment scheme: reinvestment) in consequence of which deferral relief is attributable to the shares (see paragraph 19(2) of that Schedule);
relief under Schedule 5BB to that Act (seed enterprise investment scheme: re-investment) in consequence of which SEIS re-investment relief is attributable to the shares (see paragraph 4 of that Schedule).
(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.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(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 ... 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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(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 ... will be derived, or
(ii) that a qualifying trade which the company or such a subsidiary is carrying on, or will carry on, ... will benefit.
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(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.
The issuing company is a qualifying company in relation to the relevant shares if the requirements of this Chapter are met as to—
(za) UK permanent establishment (see section 180A),
(zb) financial health (see section 180B),
(a) trading (see section 181),
(b) the issuing company to carry on the qualifying business activity (see section 183),
(c) unquoted status (see section 184),
(d) control and independence (see section 185),
(e) gross assets (see section 186),
(ea) number of employees (see section 186A),
(f) qualifying subsidiaries (see section 187), and
(g) property managing subsidiaries (see section 188).
(1) The issuing company must meet the UK permanent establishment requirement throughout period B.
(2) The UK permanent establishment requirement is that the issuing company has a permanent establishment in the United Kingdom.
(1) The issuing company must meet the financial health requirement at the beginning of period B.
(2) The financial health requirement is that the issuing company is not in difficulty.
(3) The issuing company is “in difficulty” if it is reasonable to assume that it would be regarded as a firm in difficulty for the purposes of the Community Guidelines on State Aid for Rescuing and Restructuring Firms in Difficulty (2004/C 244/02) as those guidelines had effect in the United Kingdom immediately before IP completion day.
(1) The issuing company must meet the trading requirement throughout period B.
(2) The trading requirement is that—
(a) the company, ignoring any incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades, or
(b) the company is a parent company and the business of the group does not consist wholly or as to a substantial part in the carrying on of non-qualifying activities.
(3) If the company intends that one or more other companies should become its qualifying subsidiaries with a view to their carrying on one or more qualifying trades—
(a) the company is treated as a parent company for the purposes of subsection (2)(b), and
(b) the reference in subsection (2)(b) to the group includes the company and any existing or future company that will be its qualifying subsidiary after the intention in question is carried into effect.
This subsection does not apply at any time after the abandonment of that intention.
(4) For the purpose of subsection (2)(b) 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) For the purpose of determining the business of a group, activities are ignored so far as they are activities carried on by a mainly trading subsidiary otherwise than for its main purpose.
(6) For the purposes of determining the business of a group, activities of a group company are ignored so far as they consist in—
(a) the holding of shares in or securities of a qualifying subsidiary of the parent company,
(b) the making of loans to another group company,
(c) the holding and managing of property used by a group company for the purpose of one or more qualifying trades carried on by a group company, or
(d) the holding and managing of property used by a group company for the purpose of research and development from which it is intended—
(i) that a qualifying trade to be carried on by a group company will be derived, or
(ii) that a qualifying trade carried on or to be carried on by a group company will benefit.
(7) Any reference in subsection (6)(d)(i) or (ii) to a group company includes a reference to any existing or future company which will be a group company at any future time.
(8) In this section—
“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,
“mainly trading subsidiary” means a qualifying subsidiary which, apart from incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades, and any reference to the main purpose of such a subsidiary is to be read accordingly, and
“non-qualifying activities” means—
excluded activities, and
activities (other than research and development) carried on otherwise than in the course of a trade.
(9) This section is supplemented by section 189 (meaning of “qualifying trade”) and sections 192 to 199 (excluded activities).
182 Ceasing to meet trading requirement because of administration or receivership
(1) A company is not regarded as ceasing to meet the trading requirement merely because of anything done in consequence of the company or any of its subsidiaries being in administration or receivership.
This has effect subject to subsections (2) and (3).
(2) Subsection (1) applies only if—
(a) the entry into administration or receivership, and
(b) everything done as a result of the company concerned being in administration or receivership,
is for genuine commercial reasons, and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.
(3) A company ceases to meet the trading requirement if before the end of period B—
(a) a resolution is passed, or an order is made, for the winding up of the company or any of its subsidiaries (or, in the case of a winding up otherwise than under the Insolvency Act 1986 (c. 45) or the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), any other act is done for the like purpose), or
(b) the company or any of its subsidiaries is dissolved without winding up.
This is subject to subsection (4).
(4) Subsection (3) does not apply if the winding up or dissolution is for genuine commercial reasons, and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.