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HMRC internal manual

Capital Gains Manual

Substantial shareholdings exemption: the trading company/group/subgroup requirements - dealing with requests for opinions on the trading status of companies, groups and subgroups


Companies may want some confirmation that they qualify as trading companies, that the groups they head are trading groups, that they are the holding company of a trading group or that a company they hold shares in is a trading company or the holding company of a trading subgroup. If a company asks you about the status of some other company you should bear in mind the duty of confidentiality you owe to all taxpayers. Normally companies who want to know about the status of other companies should approach those companies for this information.

A company (the investing company) may want to establish whether another company (the company invested in) in which it held shares (or interest in shares or assets related to shares) which they have now disposed of, was a qualifying company. In the first instance the investing company should seek advice from the company invested in. That company will usually be able to say if its activities were such that it was a trading company, the holding company of a trading group or trading subgroup within the meaning of the legislation. The investing company will need to take a view as to the application of the exemption (in conjunction with the guidance) and prepare their return on that basis in accordance with ordinary self-assessment principles.

You may receive enquiries from companies requiring confirmation of their own status. This may be because they are about to make a disposal and want to know if they qualify as an investing company, or because some other company has asked them about their status for some reason. There is no statutory clearance procedure under which companies can have their status confirmed. However where there is genuine uncertainty, a company can seek an opinion from HMRC under the terms of the Other Non-Statutory Clearance service as to its trading status for the purpose of Schedule 7AC TCGA 1992.

A non-statutory clearance is written confirmation of HMRC’s view of the application of tax law to a specific transaction or event where there is genuine uncertainty as to how the legislation applies in the company’s circumstances. Any application should contain the information in the checklist in the Other Non-Statutory Clearance Guidance (HMRC website).

The status of a company, group or subgroup is a question of fact but may alter as the balance of their activities change, so it will not be possible to confirm a company’s status for future periods.

Where an opinion has been expressed upon the company’s trading status pre-transaction it will not be appropriate to enter into any further correspondence on the matter. Any dispute should be resolved through the process of an enquiry into a return. See Regina v CIR ex parte Bishopp (on behalf of PWC) and Allan (on behalf of E&Y) 72TC322.