|
| |
|
| |
300 | Meaning of “qualifying trade” |
| |
(1) | For the purposes of this Chapter, a trade is a qualifying trade if— |
| |
(a) | it is conducted on a commercial basis and with a view to the realisation |
| |
| 5 |
(b) | it does not consist wholly or as to a substantial part in the carrying on |
| |
of excluded activities (see sections 303 to 310). |
| |
(2) | The carrying on of any activities of research and development from which it is |
| |
| |
(a) | that a trade will be derived which— |
| 10 |
(i) | will be a qualifying trade, and |
| |
(ii) | will be carried on wholly or mainly in the United Kingdom, or |
| |
(b) | that a trade will benefit which— |
| |
(i) | is or will be a qualifying trade, and |
| |
(ii) | is or will be carried on wholly or mainly in the United Kingdom, |
| 15 |
| is to be treated as the carrying on of a qualifying trade. |
| |
(3) | But preparing to carry on such activities does not count as preparing to carry |
| |
| |
(4) | References in this section to a trade are to be read without regard to the |
| |
definition of “trade” in section 989. |
| 20 |
301 | Meaning of “qualifying 90% subsidiary” |
| |
(1) | For the purposes of this Chapter, a company (“the subsidiary”) is a qualifying |
| |
90% subsidiary of the relevant company at any time when the following |
| |
| |
(a) | the relevant company possesses at least 90% of the issued share capital |
| 25 |
of, and at least 90% of the voting power in, the subsidiary, |
| |
(b) | the relevant company would— |
| |
(i) | in the event of a winding up of the subsidiary, or |
| |
(ii) | in any other circumstances, |
| |
| be beneficially entitled to receive at least 90% of the assets of the |
| 30 |
subsidiary which would then be available for distribution to equity |
| |
holders of the subsidiary, |
| |
(c) | the relevant company is beneficially entitled to receive at least 90% of |
| |
any profits of the subsidiary which are available for distribution to |
| |
equity holders of the subsidiary, |
| 35 |
(d) | no person other than the relevant company has control of the |
| |
| |
(e) | no arrangements are in existence by virtue of which any of the |
| |
conditions in paragraphs (a) to (d) would cease to be met. |
| |
(2) | Subsections (3), (4) and (5) of section 302 apply in relation to the conditions in |
| 40 |
| |
(a) | as they apply in relation to the conditions in subsection (2) of that |
| |
| |
(b) | with the omission from subsection (5) of “or (as the case may be) by |
| |
another subsidiary of that company”. |
| 45 |
|
| |
|
| |
|
(3) | For the purposes of subsection (1)— |
| |
(a) | the persons who are equity holders of the subsidiary, and |
| |
(b) | the percentage of the assets of the subsidiary to which an equity holder |
| |
| |
| are to be determined in accordance with paragraphs 1 and 3 of Schedule 18 to |
| 5 |
| |
(4) | In making that determination— |
| |
(a) | references in paragraph 3 of that Schedule to the first company are to |
| |
be read as references to an equity holder, and |
| |
(b) | references in that paragraph to a winding up are to be read as including |
| 10 |
references to any other circumstances in which assets of the subsidiary |
| |
are available for distribution to its equity holders. |
| |
302 | Meaning of “qualifying subsidiary” |
| |
(1) | For the purposes of this Chapter, a company (“the subsidiary”) is a qualifying |
| |
subsidiary of the relevant company if the following conditions are met. |
| 15 |
(2) | The conditions are that— |
| |
(a) | the subsidiary is a 51% subsidiary of the relevant company, |
| |
(b) | no person other than the relevant company, or another of its |
| |
subsidiaries, has control of the subsidiary, and |
| |
(c) | no arrangements are in existence by virtue of which either of the |
| 20 |
conditions in paragraphs (a) and (b) would cease to be met. |
| |
(3) | The conditions do not cease to be met merely because the subsidiary or any |
| |
other company is wound up, if the winding up— |
| |
(a) | is for genuine commercial reasons, and |
| |
(b) | is not part of a scheme or arrangement the main purpose or one of the |
| 25 |
main purposes of which is the avoidance of tax. |
| |
(4) | The conditions do not cease to be met merely because of anything done as a |
| |
consequence of the subsidiary or any other company being in administration |
| |
| |
(a) | the entry into administration or receivership, and |
| 30 |
(b) | everything done as a consequence 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) | The conditions do not cease to be met merely because arrangements are in |
| 35 |
existence for the disposal by the relevant company or (as the case may be) by |
| |
another subsidiary of that company of all its interest in the subsidiary, if the |
| |
| |
(a) | is to be for genuine commercial reasons, and |
| |
(b) | is not to be part of a scheme or arrangement the main purpose or one of |
| 40 |
the main purposes of which is the avoidance of tax. |
| |
|
| |
|
| |
|
| |
303 | Meaning of “excluded activities” |
| |
(1) | The following are excluded activities for the purposes of sections 290 and 300— |
| |
(a) | dealing in land, in commodities or futures or in shares, securities or |
| |
other financial instruments, |
| 5 |
(b) | dealing in goods otherwise than in the course of an ordinary trade of |
| |
wholesale or retail distribution, |
| |
(c) | banking, insurance, money-lending, debt-factoring, hire-purchase |
| |
financing or other financial activities, |
| |
(d) | leasing (including letting ships on charter or other assets on hire), |
| 10 |
(e) | receiving royalties or licence fees, |
| |
(f) | providing legal or accountancy services, |
| |
(g) | property development, |
| |
(h) | farming or market gardening, |
| |
(i) | holding, managing or occupying woodlands, any other forestry |
| 15 |
activities or timber production, |
| |
(j) | operating or managing hotels or comparable establishments or |
| |
managing property used as an hotel or comparable establishment, |
| |
(k) | operating or managing nursing homes or residential care homes or |
| |
managing property used as a nursing home or residential care home, |
| 20 |
| |
(l) | any activities which are excluded activities under section 310 |
| |
(provision of services or facilities for another business). |
| |
(2) | Subsection (1) is supplemented by the following provisions— |
| |
(a) | section 304 (wholesale and retail distribution), |
| 25 |
(b) | section 305 (leasing of ships), |
| |
(c) | section 306 (receipt of royalties and licence fees), |
| |
(d) | section 307 (property development), |
| |
(e) | section 308 (hotels and comparable establishments), and |
| |
(f) | section 309 (nursing homes and residential care homes). |
| 30 |
304 | Excluded activities: wholesale and retail distribution |
| |
(1) | This section supplements section 303(1)(b). |
| |
| |
(a) | subsections (3) and (4) are for determining whether a trade is a trade of |
| |
wholesale or retail distribution, and |
| 35 |
(b) | subsections (5) and (6) are for determining whether a trade of wholesale |
| |
or retail distribution is an ordinary trade of wholesale or retail |
| |
| |
(3) | A trade of wholesale distribution is one in which goods are offered for sale and |
| |
sold to persons for resale by them, or for processing and resale by them, to |
| 40 |
members of the general public for their use or consumption. |
| |
(4) | A trade of retail distribution is one in which goods are offered or exposed for |
| |
sale and sold to members of the general public for their use or consumption. |
| |
|
| |
|
| |
|
(5) | A trade of wholesale or retail distribution is not an ordinary trade of wholesale |
| |
or retail distribution if— |
| |
(a) | it consists to a substantial extent— |
| |
(i) | in dealing in goods of a kind which are collected or held as an |
| |
| 5 |
(ii) | in that activity and any other excluded activity taken together, |
| |
| |
(b) | a substantial proportion of those goods are held for a period which is |
| |
significantly longer than the period for which the trader would |
| |
reasonably be expected to hold them while trying to dispose of them at |
| 10 |
| |
(6) | In determining whether a trade of wholesale or retail distribution is an |
| |
ordinary trade of wholesale or retail distribution regard is to be had to the |
| |
extent to which it has the following features— |
| |
(a) | the goods are bought by the trader in quantities larger than those in |
| 15 |
which the trader sells them, |
| |
(b) | the goods are bought and sold by the trader in different markets, |
| |
(c) | the trader employs staff and incurs expenses in the trade in addition to |
| |
the cost of the goods and, in the case of a trade carried on by a company, |
| |
in addition to any remuneration paid to any person connected with it, |
| 20 |
(d) | there are purchases or sales from or to persons who are connected with |
| |
| |
(e) | purchases are matched with forward sales or vice versa, |
| |
(f) | the goods are held by the trader for longer than is normal for goods of |
| |
| 25 |
(g) | the trade is carried on otherwise than at a place or places commonly |
| |
used for wholesale or retail trade, and |
| |
(h) | the trader does not take physical possession of the goods. |
| |
| |
(a) | the features in paragraphs (a) to (c) are regarded as indications that the |
| 30 |
trade is an ordinary trade of wholesale or retail distribution, and |
| |
(b) | those in paragraphs (d) to (h) are regarded as indications to the |
| |
| |
305 | Excluded activities: leasing of ships |
| |
(1) | This section supplements section 303(1)(d) so far as it relates to the leasing of |
| 35 |
ships other than offshore installations or pleasure craft. |
| |
(2) | In the following provisions “ship” accordingly means a ship other than an |
| |
offshore installation or a pleasure craft. |
| |
(3) | If the requirements of subsection (4) are met, a trade is not to be regarded as |
| |
consisting in the carrying on of excluded activities within section 303(1)(d) as |
| 40 |
a result only of its consisting in letting ships on charter. |
| |
(4) | The requirements of this subsection are that— |
| |
(a) | every ship let on charter by the company carrying on the trade is |
| |
beneficially owned by the company, |
| |
(b) | every ship beneficially owned by the company is registered in the |
| 45 |
| |
|
| |
|
| |
|
(c) | the company is solely responsible for arranging the marketing of the |
| |
services of its ships, and |
| |
(d) | the conditions mentioned in subsection (5) are met in relation to every |
| |
letting on charter by the company. |
| |
(5) | The conditions referred to in subsection (4)(d) are— |
| 5 |
(a) | the letting is for a period not exceeding 12 months and no provision is |
| |
made at any time (whether in the charterparty or otherwise) for |
| |
extending it beyond that period otherwise than at the option of the |
| |
| |
(b) | no provision for the grant of a new letting to end more than 12 months |
| 10 |
after the provision is made (whether in the charterparty or otherwise) |
| |
is in force during the period of the letting otherwise than at the option |
| |
| |
(c) | the letting is by way of a bargain at arm’s length between the company |
| |
and a person who is not connected with it, |
| 15 |
(d) | under the terms of the charter the company is responsible as |
| |
| |
(i) | for taking, throughout the period of the charter, management |
| |
decisions in relation to the ship, other than those of a kind |
| |
generally regarded by persons engaged in trade of the kind in |
| 20 |
question as matters of husbandry, and |
| |
(ii) | for defraying all expenses in connection with the ship |
| |
throughout that period, or substantially all such expenses, other |
| |
than those directly incidental to a particular voyage or to the |
| |
employment of the ship during that period, and |
| 25 |
(e) | no arrangements exist by virtue of which a person other than the |
| |
company may be appointed to be responsible for the matters |
| |
mentioned in paragraph (d) on behalf of the company. |
| |
(6) | If in the case of the company carrying on the trade (“the letting company”) the |
| |
charterer is also a company and— |
| 30 |
(a) | the charterer is a qualifying subsidiary of the letting company, or |
| |
(b) | the letting company is a qualifying subsidiary of the charterer, or |
| |
(c) | both companies are qualifying subsidiaries of a third company, |
| |
| subsection (5) has effect with the omission of paragraph (c). |
| |
(7) | If any of the requirements of subsection (4) is not met in relation to any lettings |
| 35 |
of ships, the trade is not, as a result, to be treated as consisting in the carrying |
| |
on of excluded activities if— |
| |
| |
(b) | any other excluded activities |
| |
| do not, taken together, amount to a substantial part of the trade. |
| 40 |
(8) | In this section “pleasure craft” means any ship of a kind primarily used for |
| |
| |
306 | Excluded activities: receipt of royalties and licence fees |
| |
(1) | This section supplements section 303(1)(e) (receipt of royalties and licence |
| |
| 45 |
(2) | If the requirement of subsection (3) is met, a trade is not to be regarded as |
| |
consisting in the carrying on of excluded activities within section 303(1)(e) as a |
| |
|
| |
|
| |
|
result only of its consisting to a substantial extent in the receiving of royalties |
| |
| |
(3) | The requirement of this subsection is that the royalties or licence fees (or all but |
| |
for a part that is not a substantial part in terms of value) are attributable to the |
| |
exploitation of relevant intangible assets. |
| 5 |
(4) | For this purpose an intangible asset is a “relevant intangible asset” if the whole |
| |
or greater part (in terms of value) of it has been created— |
| |
(a) | by the company carrying on the trade, or |
| |
(b) | by a company which at all times during which it created the intangible |
| |
| 10 |
(i) | the holding company of the company carrying on the trade, or |
| |
(ii) | a company which, if that holding company were the relevant |
| |
company, would be a qualifying subsidiary of that company. |
| |
(5) | In the case of an intangible asset that is intellectual property, references to the |
| |
creation of an asset by a company are to its creation in circumstances in which |
| 15 |
the right to exploit it vests in the company (whether alone or jointly with |
| |
| |
| |
“holding company” means a company that— |
| |
(a) | has one or more 51% subsidiaries, but |
| 20 |
(b) | is not itself a 51% subsidiary of another company, |
| |
“intangible asset” means any asset which falls to be treated as an |
| |
intangible asset in accordance with generally accepted accountancy |
| |
| |
“intellectual property” means— |
| 25 |
(a) | any patent, trade mark, registered design, copyright, design |
| |
right, performer’s right or plant breeder’s right, or |
| |
(b) | any rights under the law of a country or territory outside the |
| |
United Kingdom which correspond or are similar to those |
| |
falling within paragraph (a). |
| 30 |
307 | Excluded activities: property development |
| |
(1) | This section supplements section 303(1)(g). |
| |
(2) | “Property development” means the development of land— |
| |
(a) | by a company which has, or at any time has had, an interest in the land, |
| |
| 35 |
(b) | with the sole or main object of realising a gain from the disposal of an |
| |
interest in the land when it is developed. |
| |
(3) | For this purpose “interest in land” means, subject to subsection (4)— |
| |
(a) | any estate, interest or right in or over land, including any right affecting |
| |
the use or disposition of land, or |
| 40 |
(b) | any right to obtain such an estate, interest or right from another which |
| |
is conditional on the other’s ability to grant it. |
| |
(4) | References in this section to an interest in land do not include— |
| |
(a) | the interest of a creditor (other than a creditor in respect of a rentcharge) |
| |
whose debt is secured by way of mortgage, an agreement for a |
| 45 |
mortgage or a charge of any kind over land, or |
| |
|
| |
|
| |
|
(b) | in the case of land in Scotland, the interest of a creditor in a charge or |
| |
security of any kind over land. |
| |
308 | Excluded activities: hotels and comparable establishments |
| |
(1) | This section supplements section 303(1)(j). |
| |
(2) | The reference to a comparable establishment is to a guest house, hostel or other |
| 5 |
establishment the main purpose of maintaining which is the provision of |
| |
facilities for overnight accommodation (with or without catering services). |
| |
(3) | The activities of a person are not to be taken to fall within section 303(1)(j) |
| |
unless that person has an estate or interest in, or is in occupation of, the hotel |
| |
or comparable establishment in question. |
| 10 |
309 | Excluded activities: nursing homes and residential care homes |
| |
(1) | This section supplements section 303(1)(k). |
| |
(2) | “Nursing home” means any establishment which exists wholly or mainly for |
| |
the provision of nursing care— |
| |
(a) | for persons suffering from sickness, injury or infirmity, or |
| 15 |
(b) | for women who are pregnant or have given birth. |
| |
(3) | “Residential care home” means any establishment which exists wholly or |
| |
mainly for the provision of residential accommodation, together with board |
| |
and personal care, for persons in need of personal care because of— |
| |
| 20 |
(b) | mental or physical disability, |
| |
(c) | past or present dependence on alcohol or drugs, |
| |
(d) | any past illnesses, or |
| |
(e) | past or present mental disorder. |
| |
(4) | The activities of a person are not to be taken to fall within section 303(1)(k) |
| 25 |
unless that person has an estate or interest in, or is in occupation of, the nursing |
| |
home or residential care home in question. |
| |
310 | Excluded activities: provision of services or facilities for another business |
| |
(1) | Providing services or facilities for a business carried on by another person |
| |
(other than a company of which the provider of the services or facilities is a |
| 30 |
qualifying subsidiary) is an excluded activity if— |
| |
(a) | the business consists wholly or as to a substantial part of activities |
| |
falling within any of paragraphs (a) to (k) of section 303(1), and |
| |
(b) | a controlling interest in the business is held by a person who also has a |
| |
controlling interest in the business carried on by the provider of the |
| 35 |
| |
(2) | Subsections (3) to (5) explain what is meant by a controlling interest in a |
| |
business for the purposes of subsection (1)(b). |
| |
(3) | In the case of a business carried on by a company, a person (“A”) has a |
| |
controlling interest in the business if— |
| 40 |
(a) | A controls the company, |
| |
|
| |
|