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HMRC internal manual

Capital Gains Manual

Entrepreneurs’ Relief: trading company and holding company of a trading group - shares and other assets held otherwise than as investments

Companies or groups may acquire shares or other assets for reasons other than investment. For example, companies, or groups 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 or group has non-trading activities. Among other issues, you will 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 or group 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 shares in order to determine whether the holding was a trading activity.