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HMRC internal manual

Venture Capital Schemes Manual

HM Revenue & Customs
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Share loss relief: individual and corporate claimants: individual claimants: type of company invested in: qualifying trading company: when requirements of condition A must be met

Condition A is one the four conditions a company must meet in order for it to be a qualifying trading company. It consists of four requirements which, generally, must be met at the time the shares are disposed of. If any of the requirements cease to be met at a time not more than three years before the date of disposal then Condition A will still be met providing the company has not been an excluded company, an investment company or a trading company since that time. These three terms are all defined at ITA07/S151(1).

| Excluded company means any of the following: | * a company which has a trade consisting wholly or mainly of dealing in land, in commodities or futures, or in shares, securities, or other financial instruments; * a company which has a trade which is not carried on on a commercial basis and in such a way that profits can reasonably be expected to be realised; * a company which is a holding company of a group other than a trading group; * a company which is a building society or a registered industrial and provident society. | || | Investment company | For tax years 2010-11 and later, ‘investment company’ means a company whose business consists wholly or mainly in the making of investments and which derives the greater part of its income from the making of investments. This meaning was introduced by CTA 2010. For tax years before 2010-11 the definition at ICTA88/S130 was used, with the further exclusion of the holding company of a trading group. The wording of the two definitions is similar, save that section 130 refers to the principal part of the company’s income rather than the greater part. There is no practical difference. | | Trading company | means a company other than an excluded company (see above) whose business consists wholly or mainly in the carrying on of a trade or trades. It also means the holding company of a trading group. (A trading group means a group of companies - a parent plus its 51% subsidiaries - the business of whose members, taken together, consists wholly or mainly in the carrying on of a trade or trades.) |

Condition A specifies that its four requirements must all be met at a specific time, or alternatively must have ceased all to be met within a limited preceding period. Condition B demands that the requirements of Condition A must also be met throughout a certain period of time: for guidance on Condition B and this period see VCM75000.