Statement of Practice 3 (2000)
Published 1 September 2000
© Crown copyright 2000
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1. Location of activity
The provisions for:
- the Enterprise Investment Scheme
- Venture Capital Trusts
- the Corporate Venturing Scheme
- Enterprise Management Incentives
- Capital Gains Tax Reinvestment Relief (which is not available for investments made after 5 April 1998)
each include the requirement that a company’s trade should, at a certain time or for a certain period, be ‘carried on wholly or mainly in the UK’. This statement explains the way in which HM Revenue and Customs (HMRC) apply this condition in those contexts.
2. The way in which the requirement is applied in any particular case will depend on the relevant facts and circumstances. A company may at any given time carry on some of the activities of the trade outside the UK and yet satisfy the requirement if the major part of the trade, that is over half of the trading activity, taken as a whole, is at that time carried on within the UK.
3. In considering whether the requirement is satisfied, HMRC will take into account the totality of the activities of the trade. For example, they will consider where the capital assets of the trade are held, where any purchasing, processing, manufacturing and selling is done, and where the company’s employees and other agents are engaged in its trading operations. For trades involving the provision of services, the location of the activities giving rise to the services and the location where they are delivered will both be relevant.
4. No one factor is in itself likely to be decisive in any particular case. In particular, HMRC will not regard a company’s activities as not being carried on in the UK solely because:
- the goods or services which it manufactures or provides are exported or supplied to overseas customers,
- its raw materials are purchased from abroad
- its raw materials or products are stored abroad
5. In the case of a trade consisting of ship chartering, the trade will be considered to satisfy the requirement if all the charters are entered into in the UK and the provision of the crews and the management of the ships while under charter take place mainly in the UK. If these conditions are not met the test may still be satisfied, but this will depend on all the facts and circumstances of the case.
6. The corresponding requirements in certain of the schemes mentioned in relation to research and development and to oil exploration are applied in a similar way.
Note: this statement supersedes Statement of Practice 7 (1998).