188ÌåÓý

Throughout this manual, all legislative references are to (“TCGA92�) unless otherwise stated.

Paragraph 27 of Schedule 7AC Ìýexplains what is meant for the purposes of the substantial shareholdings exemption legislation by ‘tradeâ€�. It means anything that

·ÌýÌýÌýÌýÌýÌý is a trade, profession or vocation within the meaning of the Income Tax Acts (including activities such as farming that are treated as a trade by section 36 Corporation Tax Act 2009 and section 1125 Corporation Tax Act 2010), provided

·ÌýÌýÌýÌýÌýÌý it is conducted on a commercial basis and with a view to the realisation of profits.

Furnished Holiday Lettings (FHL)

In addition, up to 31 March 2025 a property business that consists of the commercial letting of furnished holiday accommodation in the United Kingdom or the European Economic Area was treated as a trade for the purposes of Schedule 7AC (sections 241 & 241A - seeÌýCG73500).

Paragraph 20 of Schedule 5 Finance Act 2025 deals with the abolition of the FHL regime for SSE purposes. It modifies the “look backâ€� provision in paragraph 3(2)(d) of Schedule 7AC where a share disposal takes place on or after 1 April 2025.Ìý The FHL rules are disregarded when considering this provision.ÌýÌý Ìý

Example â€� Company A holds a substantial shareholding in company B.Ìý Company B operates both a small hotel and a significant FHL business.Ìý Company A sells its shareholding in January 2026.Ìý At the time of the disposal company B will not be treated as a trading company because it has a substantial non-trading activity following the abolition of the FHL rules.Ìý Nor will it be treated as trading at a time within the two years preceding the disposal.