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HMRC internal manual

Venture Capital Schemes Manual

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HM Revenue & Customs
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Share loss relief: individual and corporate claimants: ‘qualifying trading company’

Both the ITA and CTA rules make use of the idea of a ‘qualifying trading company’. This is central to the purpose of Share Loss Relief, which is to encourage investment in only certain types of company. As the term suggests, the company which issued shares to the claimant must not only be a trading company (as opposed to an investment company) but it must meet certain other conditions as well. These other conditions narrow the range of permissible trading activities and put an upper limit on the size of the company at the time it issues the shares. They also demand that it is not a quoted company when the shares are issued.

The meaning of ‘qualifying trading company’ is the same in the context of both individual and corporate claimants, though the precise terms of the definition have changed from time to time and are now to be found in different Acts (ITA 2007 and CTA 2010 respectively).

There is extensive guidance on the various aspects of the definition at VCM74300+.

This guidance deals with individual claimants at VCM74010+ and then goes on to consider company claimants at VCM77000+. The layout of the two parts is similar, but the material for company claimants draws heavily on the earlier material for individuals.