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HMRC internal manual

Employment Income Manual

Employee Ownership Trusts – qualifying bonus payments: The trading requirement

Section 312D ITEPA 2003

 

As noted earlier in order to make qualifying bonus payments, the employer needs to be a company.  Section 312D requires that the company must be either a trading company or a a member of a trading group.

Trading companies meet this requirement if their activities do not include to a substantial extent any activities other than trading activities. 

Trading activities are defined as activities carried on by the company in the course of, or for the purposes of, a trade carried on by it.

A trading group will meet this requirement if they are a group consisting of one or more members who carry on trading activities and the activities of whose members do not include to a substantial extent, activities other than trading group activities. 

Trading group activities are defined as activities carried on by a member of the group in the course of, or for the purposes of, a trade carried on by any member of the group. 

The activities of a group are to be treated as one business so any intra-group activities are disregarded for the purposes of this requirement. 

A business carried on in partnership with one or more other persons is treated as not being a trading activity.