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HMRC internal manual

Venture Capital Schemes Manual

CVS: investors and reliefs: substantial part

There is no statutory definition of the phrase ‘substantial part’. Whether particular activities amount to a substantial part of the aggregated activities of a group of companies is a matter of fact and degree. Where a percentage test seems appropriate and, judged by any measure that is reasonable in the circumstances (such as receipts or capital employed), the activities account for less than 20% of the whole, they should not be regarded as a substantial part.

However, in many cases a percentage test would be impossible or would clearly not give a fair result. In such cases Inspectors will take into account not only measurable factors but also factors such as the degree of importance which activities appear to have for the company and the amount of time which might need to be devoted to them at managerial level and at the level of the board of directors.