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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

From
HM Revenue & Customs
Updated
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Enterprise Management Incentives (EMI): Excluded activities: Dealing in goods otherwise than in ordinary wholesale and retail distribution

An ordinary trade of wholesale and retail distribution is outside the exclusion of dealing in goods. In determining whether a trade is an ordinary trade of wholesale or retail distribution the following features must be considered.

Features that may indicate that the trade is normal wholesale or retail distribution are:

  • the vendor buys goods in larger quantities than he sells them,
  • the goods are bought and sold in different markets,
  • the vendor employs staff and incurs expenses in addition to the cost of the goods and, if appropriate, remuneration.

 

Features that may indicate that the trade is not normal wholesale or retail distribution are:

  • there are purchases or sales from people connected to the vendor,
  • purchases are matched with forward sales or vice versa,
  • the goods are held by the vendor for longer than is usual for goods of the kind in question,
  • the trade is carried on at a place or places not commonly used for such a trade,
  • the vendor does not take physical possession of the goods.

 

In the vast majority of cases, it is clear whether a trade is an ordinary wholesale or retail trade of distribution without referring to the list. No method of evaluating the listed features is prescribed. Not all the listed features will always be relevant, and the presence or absence of a particular feature will not be conclusive.

In addition to this list of features, the legislation provides that in one particular set of circumstances a trade is not an ordinary trade of wholesale or retail distribution. Where a trade consists ‘to a substantial extent’ of dealing in goods of a kind which are either collected or held as an investment (for example, fine wines, antiques or vintage cars), and a ‘substantial proportion’ of the goods are held for a period which is significantly longer than the period for which a vendor would reasonably be expected to hold them while endeavouring to dispose of them at their market value then it is not an ordinary trade of wholesale or retail distribution. Therefore if a substantial proportion of the ‘investment’ goods are not being actively marketed at a realistic price, the trade is disqualified even if a ‘normal’ trader in that field would be holding such stock for maturity and actively marketing it, (Paragraph 17).