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HMRC internal manual

Capital Gains Manual

Entrepreneurs’ Relief: trading company and holding company of a trading group - meaning of acquiring or starting to carry on a trade, or acquiring shares in a trading company

TCGA92/S165A (4) (c) & (d) and TCGA92/S165A (9) (c) & (d)

Activities that a company, or group, undertakes with a view to acquiring or starting to carry on a trade, or acquiring a significant interest in the share capital of a trading company or group, may count as trading activities.

It is quite common for a company, or group, to dispose of its one trade (or main trading subsidiary) and to invest (or put on deposit) the cash proceeds while it looks around to acquire a new trade or trading subsidiary. A company or group temporarily in this position and actively seeking to acquire a new trade or trading subsidiary might still be a trading company or trading group if it does not have substantial non-trading activities.

Trading activities here include assessing the potential viability of a trade which the company or group is considering carrying on and other such activities even though they are not directly preparatory to the carrying on of the particular trade under consideration. So, a company or group which has surplus cash that it intends to use to acquire a trade, or to start up one from scratch, which is actively evaluating a number of possible trades may be engaged in trading activities.

However, such activities are trading activities only if an acquisition is actually made, or a new trade is commenced, as soon as is reasonably practicable in the circumstances.