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| The gross assets requirement |
| 22. - (1) The gross assets requirement in the case of a single company is that the value of the company's gross assets- |
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(a) does not exceed £15 million immediately before the issue of the relevant shares, and |
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(b) does not exceed £16 million immediately afterwards. |
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(2) The gross assets requirement in the case of a parent company is that the consolidated value of the group assets- |
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(a) does not exceed £15 million immediately before the issue of the relevant shares, and |
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(b) does not exceed £16 million immediately afterwards. |
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(3) The consolidated value of the group assets means the aggregate value of the gross assets of the group, disregarding any that consist in rights against, or shares in or securities of, another group company. |
| The trading activities requirement |
| 23. - (1) The issuing company is not a qualifying issuing company in relation to the relevant shares unless it meets the trading activities requirement throughout the qualification period relating to those shares. |
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(2) The trading activities requirement in the case of a single company is that the company- |
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(a) disregarding any incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades, and |
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(b) is carrying on a qualifying trade or preparing to do so. |
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(3) The trading activities requirement in the case of a parent company is that- |
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(a) the business of the group does not consist wholly or as to a substantial part in the carrying on of non-qualifying activities, and |
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(b) at least one group company- |
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(i) disregarding any incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades, and
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(ii) is carrying on a qualifying trade or preparing to do so.
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(4) For this purpose the business of the group means what would be the business of the group if the activities of the group companies taken together were regarded as one business. |
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(5) The requirement of sub-paragraph (2) or (3) is not met at any time by reason of the issuing company or a subsidiary preparing to carry on a qualifying trade if the company or subsidiary does not begin to carry on the trade within two years after the issue of the relevant shares. |
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(6) For the purposes of determining whether the company falls within sub-paragraph (2)(a) or (3)(b)(i), the purposes for which it exists shall be disregarded to the extent that they consist in the carrying on of the following activities- |
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(a) in the case of a single company, the holding and managing of property used by the company for one or more qualifying trades carried on by it, |
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(b) in the case of a group company, any activities within sub-paragraph (7)(a), (b) or (d), and |
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(c) in any case, the holding of shares to which investment relief is attributable, unless the holding of such shares amounts to a substantial part of the company's business. |
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(7) For the purposes of determining the business of a group, activities of a group company shall be disregarded to the extent that they consist in- |
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(a) the holding of shares in or securities of, or the making of loans to, another group company; |
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(b) the holding and managing of property used by a group company for the purposes of one or more qualifying trades carried on by a group company; |
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(c) the holding of shares to which investment relief is attributable, unless the holding of such shares amounts to a substantial part of the company's business, or |
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(d) incidental activities of a company which meets the trading activities requirement for a single company. |
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(8) In sub-paragraph (3)(a) "non-qualifying activities" means- |
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(a) excluded activities other than- |
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(i) the letting of ships to which paragraph 28 applies (ships other than oil rigs or pleasure craft) in circumstances where the requirement of sub-paragraph (2) of that paragraph is met; or
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(ii) the receiving of royalties or licence fees within paragraph 29 in circumstances where the requirements mentioned in sub-paragraph (2) of that paragraph are met; and
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(b) activities carried on otherwise than in the course of a trade. |
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(9) In this paragraph- |
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(a) "incidental purposes" means purposes having no significant effect (other than in relation to incidental matters) on the extent of the activities of the company in question; |
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(b) "incidental activities" means activities carried on in pursuance of incidental purposes. |
| Ceasing to meet trading activities requirement by reason of administration, receivership, etc. |
| 24. - (1) A company which is in administration or receivership shall not be regarded as ceasing to meet the trading activities requirement by reason of anything done as a consequence of the company, or any of its qualifying subsidiaries, being in administration or receivership. |
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This sub-paragraph has effect subject to sub-paragraphs (2) and (3). |
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(2) Sub-paragraph (1) applies only if- |
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(a) the making of the order within paragraph (a) or, as the case may be, (b) of paragraph 102(4) (administration orders and orders for appointment of receiver etc.), and |
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(b) everything done as a consequence of the company being in administration or receivership, |
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is for commercial reasons and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax. |
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(3) A company ceases to meet the trading activities requirement if- |
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(a) a resolution is passed, or an order is made, for the winding up of the company or any of its qualifying subsidiaries (or, in the case of a winding up otherwise than under the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989, any other act is done for the like purpose), or |
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(b) the company, or any of its qualifying subsidiaries, is dissolved without winding up. |
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This is subject to sub-paragraph (4). |
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(4) A company shall not be regarded as ceasing to meet the trading activities requirement if- |
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(a) it does so by reason of the company or any of its subsidiaries being wound up or dissolved without winding up, and |
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(b) the winding up or dissolution is for commercial reasons and not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax. |
| Meaning of "qualifying trade" |
| 25. - (1) A trade is a qualifying trade if- |
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(a) it is carried on wholly or mainly in the United Kingdom, |
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(b) it is conducted on a commercial basis and with a view to the realisation of profits, and |
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(c) it does not consist wholly or as to a substantial part in the carrying on of excluded activities. |
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(2) The carrying on of activities of research and development from which it is intended that a connected qualifying trade will be derived or benefit is treated as the carrying on of a qualifying trade. |
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But preparing to carry on such activities does not count as preparing to carry on a qualifying trade. |
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(3) For the purposes of sub-paragraph (2) a "connected qualifying trade" means a qualifying trade carried on- |
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(a) by the company carrying on the activities of research and development, or |
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(b) if that company is a member of a group, by any other group company. |
| Excluded activities |
| 26. - (1) The following are excluded activities- |
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(a) dealing in land, in commodities or futures or in shares, securities or other financial instruments; |
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(b) dealing in goods otherwise than in the course of an ordinary trade of wholesale or retail distribution; |
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(c) banking, insurance, money-lending, debt-factoring, hire-purchase financing or other financial activities; |
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(d) leasing (including letting ships on charter or other assets on hire) or receiving royalties or other licence fees; |
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(e) providing legal or accountancy services; |
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(f) property development; |
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(g) farming or market gardening; |
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(h) holding, managing or occupying woodlands, any other forestry activities or timber production; |
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(i) operating or managing hotels or comparable establishments or managing property used as a hotel or comparable establishment; and |
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(j) operating or managing nursing homes or residential care homes, or managing property used as a nursing home or residential care home. |
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(2) Sub-paragraph (1) is supplemented by the following provisions- |
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paragraph 27 (wholesale and retail distribution); |
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paragraph 28 (leasing of ships); |
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paragraph 29 (receipt of royalties and licence fees); |
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paragraph 30 (property development); |
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paragraph 31 (hotels and comparable establishments); |
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paragraph 32 (nursing homes and residential care homes); and |
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paragraph 33 (provision of facilities for another business). |