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HMRC internal manual

Venture Capital Schemes Manual

Share loss relief: individual and corporate claimants: individual claimants: type of company invested in: qualifying trading company: condition A: trading requirement: qualifying trades and excluded activities

The trading requirement is at ITA07/S137. It is that the company exists wholly for the purpose of carrying on one or more qualifying trades, or that it is a parent company and the business of the group does not consist wholly or as to a substantial part in the carrying on of non-qualifying activities.

The extended definition of trade at section 989 (including any venture in the nature of trade) does not apply for the purposes of the trading requirement within condition A (section 189(2), adopted by section 137(7)).

Qualifying trades

Qualifying trade is defined at section 137(7) by reference to section 189, which contains the definition for EIS purposes. A trade is a qualifying trade which is conducted on a commercial basis and with a view to the realisation of profits. It must not consist wholly or as to a substantial part in the carrying on of excluded activities.

Section 137(8) modifies section 189(1)(b), so that this ‘excluded activities’ condition applies throughout the period during which qualifying trading company condition B must be met (see VCM75000).

Excluded activities

Excluded activities are defined at ITA07/S192 with further detail at sections 193 to 199. Again, these sections constitute the definition for EIS purposes and section 137(8) slightly modifies section 194(4) so that it is relevant to Share Loss Relief. Guidance on excluded activities is at VCM3000+.