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HMRC internal manual

Venture Capital Schemes Manual

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HM Revenue & Customs
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CVS: general: qualifying issuing companies: trading activities requirement

FA00/SCH15/PARA23

Where, at any time in the qualification period, the issuing company has no subsidiaries, the trading activities requirement is that the company exists for the purpose of carrying on a qualifying trade and is either carrying on that trade or preparing to do so. As regards how the purpose for which a company exists may be ascertained.

Where, at any time in the qualification period, the issuing company has one or more subsidiaries, the trading activities requirement is that at least one subsidiary must satisfy the above requirement. In addition, the business of the group must not consist, either wholly or as to a substantial part, of carrying on non-qualifying activities.

The way this rule is applied is as follows:

(1) The following types of activity are ignored for all purposes:

  • holding shares in a subsidiary, making loans to a subsidiary, and making loans to the parent company,
  • holding and managing property used by any group company for the purpose of a trade or of research and development,
  • insignificant activities, where the particular company which carries them on exists for the purpose of carrying on a trade.

Everything else carried on by any company in the group constitutes ‘the business of the group’.

(2) Any activities in the following categories have to be identified:

  • trades, or activities which are parts of trades, which are on the list of excluded activities in VCM3000 - except where either of the waivers in VCM3050 or VCM3060 applies,
  • activities which are not carried on in the course of a trade, other than research and development (for example, investment in property or shares).

Unless such activities together form a substantial part of the activities of the group as a whole, the company satisfies the trading activity requirement.

As regards what amounts to a substantial part, see VCM3010.