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HMRC internal manual

Venture Capital Schemes Manual

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SEIS: general requirements: meaning of ‘qualifying business activity’

ITA07/S257HG

The shares must be issued in order to raise money for the purpose of a ‘qualifying business activity’, and the money must be spent for the purpose of that activity.

The term ‘qualifying business activity’ covers the following:

  • carrying on a new qualifying trade (see VCM34020),
  • preparing to carry on a new qualifying trade,
  • carrying on research and development, which must either be carried on when the shares are issued or be commenced immediately afterwards, and which the company intends should benefit or lead to a new qualifying trade.

The activity may be carried on either by the company issuing the shares or by a company which is, at the date of issue of the shares, a qualifying 90 percent subsidiary of that company. See VCM34040 for the meaning of ‘qualifying 90 percent subsidiary’.

Preparing to carry on a trade

‘Preparing’ to carry on a trade covers both the setting up of a new trade and the acquisition of an existing trade from its present owner.

Preparing to trade does not cover preliminary activities such as market research aimed at discovering whether a trade would be likely to succeed, or raising capital, neither does it cover research and development.

As regards the date when a company begins to carry on a trade, see BIM70501 onwards.

Research and development

‘Research and development’ is defined in accordance with ITA07/S1006.