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HMRC internal manual

Capital Gains Manual

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


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 ‘c’ and ‘d’ 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 ‘d’ 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 ‘activities’ 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.