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HMRC internal manual

Capital Gains Manual

Substantial shareholdings exemption: the trading company/group/subgroup requirements - when are non-trading activities substantial - shares and other assets held otherwise than as investments


Companies may acquire shares or other assets for reasons other than investment. For example, companies may be paid in shares instead of cash as fees for services rendered or work carried out.

Once such shares have been acquired the reasons for retaining them will need to be considered in order to determine whether or not their retention means that a company has non- trading activities. Among other issues, we should need to know the reasons why the shares were taken in settling a trade debt and whether they can reasonably be turned into cash or otherwise exchanged to meet trading requirements.

A company may have to hold shares in another company as a pre-requisite to trading (for example, companies may be expected to own shares in a trade organisation). In such cases we should want to know the reasons for holding such a share in order to determine whether the holding was a trading activity.