CG53113 - Substantial shareholdings exemption: the trading company/group/subgroup requirements - trading activities

TCGA92/SCH7AC/PARA20 & TCGA92/SCH7AC/PARA21 & TCGA92/SCH7AC/PARA22

Paragraphs 20, 21 and 22 of Schedule 7AC TCGA 1992 define trading activities. For a company/group/subgroup these are activities carried on by the company/a member of the group/subgroup

  1. in the course of, or for the purposes of, a trade being carried on by it/any member of the group/subgroup,
  2. for the purposes of a trade that it/any member of the group/subgroup is preparing to carry on,
  3. with a view to its/any member of the group/subgroup acquiring or starting to carry on a trade, or
  4. with a view to its/any member of the group/subgroup acquiring a significant interest in the share capital of another company that -

i. is a trading company or the holding company of a trading group, or a trading subgroup and

ii. if the acquiring company is a member of a group, is not a member of that group.

However, activities within 鈥榗鈥� and 鈥榙鈥� count as trading activities only if the company/group member/subgroup member starts to carry on the trade, or acquires the shares, as soon as is reasonably practicable in the circumstances.

For the purposes of 鈥榙鈥� a significant interest is such an interest as

  • would make the company acquired a member of the same group/subgroup as the acquiring company, or
  • would result in the acquiring company having a qualifying shareholding in a joint venture company without making the two companies members of the same group (see CG53114 for definitions of qualifying shareholding and joint venture company).

The word 鈥榓ctivities鈥� is not defined in the statute but in this context is interpreted to mean what a company does. Activities will therefore include engaging in trading operations, making and holding investments, planning, holding meetings and so forth. The legislation makes explicit that a company may have trading activities both when it is trading and before it commences to trade.