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FA00/SCH15/PARA10(2) & PARA11

The requirement in respect of a single company is that it must exist wholly for the purpose of carrying on a non-financial trade. A non-financial trade is defined at FA00/SCH15/PARA11 as one which is conducted on a commercial basis and with a view to profit and does not consist, either wholly or as to a substantial part (see VCM91170), of financial activities. There is no definition of ‘financial activities�, but paragraph 11 mentions certain activities which are covered. The list contains not only items such as banking and insurance, which are mentioned as financial activities at FA00/SCH15/PARA26 (1), but also such activities as dealing in shares, futures and options.

In determining whether a company exists wholly for the purpose of carrying on a non-financial trade the following are to be disregarded:

• purposes which have no significant effect on the extent of the company’s activities, except in relation to incidental matters,
• the holding and managing of property used by the company for a non-financial trade,
• the holding of any shares to which investment relief is attributable - unless the holding of such shares forms a substantial part of the company’s business.