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HMRC internal manual

Residence, Domicile and Remittance Basis Manual

HM Revenue & Customs
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Remittance Basis: Exemptions: Business investment relief: Condition A - Eligible Trading Company (s809VD(2) ITA2007)

An eligible trading company is a private limited company which is;

  • carrying on at least one commercial trade, or
  • preparing to do so within two years of the date on which the funds to be invested were brought to the UK (this is the 2 year start-up rule) [see RDRM34430]


  • carrying on a commercial trade is all or substantially all it does, or it is reasonably expected to do once it begins trading.

In most cases it is obvious when a trade exists, but where there is doubt you will need to fully investigate the facts and consider case law. Further guidance on what is trade can be found in the Business Income Manual at BIM20050. For business investment relief purposes, there is an additional requirement that the trade should be commercial, that is conducted on a commercial basis with a view to making profits. Trade also includes:

  • any activity that is treated as if it were a trade for Corporation Tax purposes. This includes farming or market gardening, the commercial occupation of land (but not woodland) and the profits of mines, quarries and other concerns
  • a business of generating income from land. This will include profits arising from the renting or leasing of land or property.
  • a company carrying on research and development activities which are intended to lead to a commercial trade. However, preparing to carry out research and development activities is not itself a commercial trade for the purposes of the business investment relief.

The extension of the definition of trade to include generating income from land and research and development activities only applies for business investment relief purposes. It does not change the definition of trade for other tax purposes. (s809VE ITA2007)


Constance is a remittance basis taxpayer who intends to invest £100,000 of her foreign income and gains in Sparks Moore Limited, a company which produces electronic components for a well known car manufacturer. The company is a private limited company which is not listed on a recognised stock exchange and is carrying out a commercial trade.

Sparks Moore Limited is therefore an eligible trading company for the purposes of the business investment relief.  

The phrase ‘all or substantially all’ used in the definition of an eligible trading company is not defined in the legislation. Whether or not carrying on a commercial trade is all or substantially all of a trading company’s activities will depend on a consideration of all the relevant facts. However, where carrying on a commercial trade accounts for at least 80% of a company’s total activities, the company will generally be regarded as meeting this requirement.