|
| |
|
176 | The minimum period requirement |
| |
(1) | The issue of shares which includes the relevant shares must meet— |
| |
(a) | the requirement of subsection (2) in a case where the money raised by |
| |
an issue of shares is raised wholly for the purpose of a qualifying |
| |
business activity falling within section 179(2), |
| 5 |
(b) | the requirement of subsection (3) in a case where the money raised by |
| |
an issue of shares is raised wholly or partly for the purpose of a |
| |
qualifying business activity falling within section 179(4). |
| |
(2) | The requirement is that— |
| |
(a) | the trade concerned must have been carried on for a period of at least 4 |
| 10 |
months ending at or after the time of the issue, and |
| |
(b) | throughout that period— |
| |
(i) | the trade must have been carried on by the issuing company or |
| |
a qualifying 90% subsidiary of that company, and |
| |
(ii) | the trade must not have been carried on by any other person. |
| 15 |
(3) | The requirement is that— |
| |
(a) | the research and development concerned must have been carried on for |
| |
a period of at least 4 months ending at or after the time of the issue, and |
| |
(b) | throughout that period— |
| |
(i) | the research and development must have been carried on by the |
| 20 |
issuing company or a qualifying 90% subsidiary of that |
| |
| |
(ii) | the research and development must not have been carried on by |
| |
| |
| 25 |
(a) | merely because of the issuing company or any other company being |
| |
wound up, or dissolved without winding up— |
| |
(i) | the trade is carried on as mentioned in subsection (2), or |
| |
(ii) | the research and development is carried on as mentioned in |
| |
| 30 |
| for a period shorter than 4 months, and |
| |
(b) | the winding up or dissolution— |
| |
(i) | is for genuine commercial reasons, and |
| |
(ii) | is not part of a scheme or arrangement the main purpose or one |
| |
of the main purposes of which is the avoidance of tax, |
| 35 |
| subsection (2) or, as the case may be, (3) has effect as if it referred to that shorter |
| |
| |
| |
(a) | merely because of anything done as a result of the issuing company or |
| |
any other company being in administration or receivership— |
| 40 |
(i) | the trade is carried on as mentioned in subsection (2), or |
| |
(ii) | the research and development is carried on as mentioned in |
| |
| |
| for a period shorter than 4 months, and |
| |
(b) | the entry into administration or receivership, and everything done as a |
| 45 |
result of the company concerned being in administration or |
| |
| |
(i) | is for genuine commercial reasons, and |
| |
|
| |
|
| |
|
(ii) | is not part of a scheme or arrangement the main purpose or one |
| |
of the main purposes of which is the avoidance of tax, |
| |
| subsection (2) or, as the case may be, (3) has effect as if it referred to that shorter |
| |
| |
177 | The no pre-arranged exits requirement |
| 5 |
(1) | The issuing arrangements for the relevant shares must not include— |
| |
(a) | arrangements with a view to the subsequent repurchase, exchange or |
| |
other disposal of those shares or of other shares in or securities of the |
| |
| |
(b) | arrangements for or with a view to the cessation of any trade which is |
| 10 |
being or is to be or may be carried on by the issuing company or a |
| |
person connected with that company, |
| |
(c) | arrangements for the disposal of, or of a substantial amount (in terms |
| |
of value) of, the assets of the issuing company or of a person connected |
| |
| 15 |
(d) | arrangements the main purpose or one of the main purposes of which |
| |
is (by means of any insurance, indemnity or guarantee or otherwise) to |
| |
provide partial or complete protection for persons investing in shares |
| |
in the issuing company against what would otherwise be the risks |
| |
attached to making the investment. |
| 20 |
(2) | The arrangements referred to in subsection (1)(a) do not include any |
| |
arrangements with a view to such an exchange of shares, or shares and |
| |
securities, as is mentioned in section 247(1). |
| |
(3) | The arrangements referred to in subsection (1)(b) and (c) do not include any |
| |
arrangements applicable only on the winding up of a company except in a case |
| 25 |
| |
(a) | the issuing arrangements include arrangements for the company to be |
| |
| |
(b) | the arrangements are applicable on the winding up of the company |
| |
otherwise than for genuine commercial reasons. |
| 30 |
(4) | The arrangements referred to in subsection (1)(d) do not include any |
| |
arrangements which are confined to the provision— |
| |
(a) | for the issuing company itself, or |
| |
(b) | if the issuing company is a parent company that meets the trading |
| |
requirement in section 181(2)(b), for the issuing company itself, for the |
| 35 |
issuing company itself and one or more of its subsidiaries or for one or |
| |
more of its subsidiaries, |
| |
| of any such protection against the risks arising in the course of carrying on its |
| |
business as might reasonably be expected to be provided in normal |
| |
commercial circumstances. |
| 40 |
(5) | In this section “the issuing arrangements” means— |
| |
(a) | the arrangements under which the shares are issued to the individual, |
| |
| |
(b) | any arrangements made before the issue of the shares to the individual |
| |
in relation to or in connection with that issue. |
| 45 |
|
| |
|
| |
|
178 | The no tax avoidance requirement |
| |
The relevant shares must be issued for genuine commercial reasons, and not as |
| |
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 business activity" |
| 5 |
179 | Meaning of “qualifying business activity” |
| |
(1) | In this Part “qualifying business activity”, in relation to the issuing company, |
| |
| |
| |
| 10 |
| if it is carried on by the company or a qualifying 90% subsidiary of the |
| |
| |
| This is subject to subsections (3) and (5). |
| |
| |
(a) | the carrying on of a qualifying trade which, on the date the relevant |
| 15 |
shares are issued, the company or a qualifying 90% subsidiary of the |
| |
company is carrying on, or |
| |
(b) | the activity of preparing to carry on (or preparing to carry on and then |
| |
carrying on) a qualifying trade— |
| |
(i) | which, on that date, is intended to be carried on wholly or |
| 20 |
mainly in the United Kingdom by the company or such a |
| |
| |
(ii) | which is begun to be carried on by the company or such a |
| |
subsidiary within two years after that date. |
| |
(3) | But activity A is a qualifying business activity only if, at any time in period B |
| 25 |
when the qualifying trade is so carried on, the qualifying trade is carried on |
| |
wholly or mainly in the United Kingdom. |
| |
(4) | Activity B is the carrying on of research and development— |
| |
(a) | which, on the date the relevant shares are issued, the company or a |
| |
qualifying 90% subsidiary of the company is carrying on, or which the |
| 30 |
company or such a subsidiary begins to carry on immediately |
| |
| |
(b) | from which, on that date, it is intended— |
| |
(i) | that a qualifying trade which the company or such a subsidiary |
| |
will carry on wholly or mainly in the United Kingdom will be |
| 35 |
| |
(ii) | that a qualifying trade which the company or such a subsidiary |
| |
is carrying on, or will carry on, wholly or mainly in the United |
| |
| |
(5) | But activity B is a qualifying business activity only if, at any time in period B |
| 40 |
| |
(a) | the research and development is carried on, or |
| |
(b) | the qualifying trade which is derived, or which benefits or is intended |
| |
to benefit, from the research and development is carried on, |
| |
| the research and development or, as the case may be, the qualifying trade is |
| 45 |
carried on wholly or mainly in the United Kingdom. |
| |
|
| |
|
| |
|
| |
(a) | for the purposes of subsection (2)(b) when a qualifying trade is begun |
| |
to be carried on by a qualifying 90% subsidiary of the company, or |
| |
(b) | for the purposes of subsection (4)(a) when research and development is |
| |
begun to be carried on by such a subsidiary, |
| 5 |
| any carrying on of the trade or, as the case may be, the research and |
| |
development by it before it became such a subsidiary is ignored. |
| |
(7) | References in subsection (2)(b)(i) or (4)(b) to a qualifying 90% subsidiary of the |
| |
company include references to any existing or future company which will be |
| |
such a subsidiary at any future time. |
| 10 |
| |
| |
| |
| |
The issuing company is a qualifying company in relation to the relevant shares |
| 15 |
if the requirements of this Chapter are met as to— |
| |
(a) | trading (see section 181), |
| |
(b) | the issuing company to carry on the qualifying business activity (see |
| |
| |
(c) | unquoted status (see section 184), |
| 20 |
(d) | control and independence (see section 185), |
| |
(e) | gross assets (see section 186), |
| |
(f) | qualifying subsidiaries (see section 187), and |
| |
(g) | property managing subsidiaries (see section 188). |
| |
| 25 |
181 | The trading requirement |
| |
(1) | The issuing company must meet the trading requirement throughout period B. |
| |
(2) | The trading requirement is that— |
| |
(a) | the company, ignoring any incidental purposes, exists wholly for the |
| |
purpose of carrying on one or more qualifying trades, or |
| 30 |
(b) | the company 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- |
| |
| |
(3) | If the company intends that one or more other companies should become its |
| |
qualifying subsidiaries with a view to their carrying on one or more qualifying |
| 35 |
| |
(a) | the company is treated as a parent company for the purposes of |
| |
| |
(b) | the reference in subsection (2)(b) to the group includes the company |
| |
and any existing or future company that will be its qualifying |
| 40 |
subsidiary after the intention in question is carried into effect. |
| |
|
| |
|
| |
|
| This subsection does not apply at any time after the abandonment of that |
| |
| |
(4) | For the purpose of subsection (2)(b) 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. |
| 5 |
(5) | For the purpose of determining the business of a group, activities are ignored |
| |
so far as they are activities carried on by a mainly trading subsidiary otherwise |
| |
than for its main purpose. |
| |
(6) | For the purposes of determining the business of a group, activities of a group |
| |
company are ignored so far as they consist in— |
| 10 |
(a) | the holding of shares in or securities of a qualifying subsidiary of the |
| |
| |
(b) | the making of loans to another group company, |
| |
(c) | the holding and managing of property used by a group company for |
| |
the purpose of one or more qualifying trades carried on by a group |
| 15 |
| |
(d) | the holding and managing of property used by a group company for |
| |
the purpose of research and development from which it is intended— |
| |
(i) | that a qualifying trade to be carried on by a group company will |
| |
| 20 |
(ii) | that a qualifying trade carried on or to be carried on by a group |
| |
| |
(7) | Any reference in subsection (6)(d)(i) or (ii) to a group company includes a |
| |
reference to any existing or future company which will be a group company at |
| |
| 25 |
| |
“incidental purposes” means purposes having no significant effect (other |
| |
than in relation to incidental matters) on the extent of the activities of |
| |
| |
“mainly trading subsidiary” means a qualifying subsidiary which, apart |
| 30 |
from incidental purposes, exists wholly for the purpose of carrying on |
| |
one or more qualifying trades, and any reference to the main purpose |
| |
of such a subsidiary is to be read accordingly, and |
| |
“non-qualifying activities” means— |
| |
(a) | excluded activities, and |
| 35 |
(b) | activities (other than research and development) carried on |
| |
otherwise than in the course of a trade. |
| |
(9) | This section is supplemented by section 189 (meaning of “qualifying trade”) |
| |
and sections 192 to 199 (excluded activities). |
| |
182 | Ceasing to meet trading requirement because of administration or |
| 40 |
| |
(1) | A company is not regarded as ceasing to meet the trading requirement merely |
| |
because of anything done in consequence of the company or any of its |
| |
subsidiaries being in administration or receivership. |
| |
| This has effect subject to subsections (2) and (3). |
| 45 |
(2) | Subsection (1) applies only if— |
| |
|
| |
|
| |
|
(a) | the entry into administration or receivership, and |
| |
(b) | everything done as a result of the company concerned being in |
| |
administration or receivership, |
| |
| is for genuine 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. |
| 5 |
(3) | A company ceases to meet the trading requirement if before the end of period |
| |
| |
(a) | a resolution is passed, or an order is made, for the winding up of the |
| |
company or any of its subsidiaries (or, in the case of a winding up |
| |
otherwise than under the Insolvency Act 1986 (c. 45) or the Insolvency |
| 10 |
(Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), any other act is |
| |
done for the like purpose), or |
| |
(b) | the company or any of its subsidiaries is dissolved without winding up. |
| |
| This is subject to subsection (4). |
| |
(4) | Subsection (3) does not apply if the winding up or dissolution is for genuine |
| 15 |
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. |
| |
183 | The issuing company to carry on the qualifying business activity requirement |
| |
(1) | The requirement of this section is met in relation to the issuing company if, at |
| |
no time in period B, is any of the following— |
| 20 |
(a) | the relevant qualifying trade, |
| |
(b) | relevant preparation work (if any), and |
| |
(c) | relevant research and development (if any), |
| |
| carried on by a person other than the issuing company or a qualifying 90% |
| |
subsidiary of that company. |
| 25 |
(2) | Subsection (3) has effect for the purpose of determining whether the |
| |
requirement of this section is met in relation to the issuing company in a case |
| |
where relevant preparation work is carried out by that company or a |
| |
qualifying 90% subsidiary of that company. |
| |
(3) | The carrying on of the relevant qualifying trade by a company other than the |
| 30 |
issuing company or a subsidiary of that company is to be ignored if it takes |
| |
place at any time in period B before the issuing company or any qualifying 90% |
| |
subsidiary of that company begins to carry on that trade. |
| |
(4) | The requirement of this section is not regarded as failing to be met in relation |
| |
to the issuing company if, merely because of any act or event within subsection |
| 35 |
(5), the relevant qualifying trade— |
| |
(a) | ceases to be carried on in period B by the issuing company or any |
| |
qualifying 90% subsidiary of that company, and |
| |
(b) | is subsequently carried on in that period by a person who is not at any |
| |
time in period C connected with the issuing company. |
| 40 |
(5) | The following are acts and events within this subsection— |
| |
(a) | anything done as a consequence of the issuing company or any other |
| |
company being in administration or receivership, and |
| |
(b) | the issuing company or any other company being wound up, or |
| |
dissolved without being wound up. |
| 45 |
(6) | Subsection (4) applies only if— |
| |
|
| |
|
| |
|
(a) | the entry into administration or receivership, and everything done as a |
| |
consequence of the company concerned being in administration or |
| |
| |
(b) | the winding up or dissolution, |
| |
| is for genuine commercial reasons, and is not part of a scheme or arrangement |
| 5 |
the main purpose or one of the main purposes of which is the avoidance of tax. |
| |
| |
“relevant preparation work” means preparations within section 179(2)(b) |
| |
which are the subject of the qualifying business activity mentioned in |
| |
| 10 |
“the relevant qualifying trade” means the qualifying trade which is the |
| |
subject of that qualifying business activity, |
| |
“relevant research and development” means— |
| |
(a) | research and development within section 179(4) which is the |
| |
subject of that qualifying business activity, and |
| 15 |
(b) | any other preparations for the carrying on of the qualifying |
| |
trade which is the subject of that activity. |
| |
184 | The unquoted status requirement |
| |
(1) | At the beginning of period B— |
| |
(a) | the issuing company must be an unquoted company, |
| 20 |
(b) | there must be no arrangements in existence for the issuing company to |
| |
cease to be an unquoted company, and |
| |
(c) | there must be no arrangements in existence for the issuing company to |
| |
become a subsidiary of another company (“the new company”) by |
| |
virtue of an exchange of shares, or shares and securities, if— |
| 25 |
(i) | section 247 applies in relation to the exchange, and |
| |
(ii) | arrangements have been made with a view to the new company |
| |
ceasing to be an unquoted company. |
| |
(2) | In this section “unquoted company” means a company none of whose shares, |
| |
stocks, debentures or other securities are marketed to the general public. |
| 30 |
(3) | For the purposes of subsection (2), shares, stocks, debentures or other securities |
| |
are marketed to the general public if they are— |
| |
(a) | listed on the Stock Exchange or a stock exchange that is a recognised |
| |
stock exchange by virtue of an order made under section 939, |
| |
(b) | listed on a designated exchange in a country outside the United |
| 35 |
| |
(c) | dealt in outside the United Kingdom by such means as may be |
| |
| |
(4) | In subsection (3)(b) and (c) “designated” means designated by an order made |
| |
by the Commissioners for Her Majesty’s Revenue and Customs for the |
| 40 |
purposes of that provision. |
| |
(5) | An order made for the purposes of subsection (3)(b) may designate an |
| |
exchange by name, or by reference to any class or description of exchanges, |
| |
including a class or description framed by reference to any authority or |
| |
approval given in a country outside the United Kingdom. |
| 45 |
|
| |
|