Finance Act 2000

The trading activities requirement

17 (1) The trading activities requirement in the case of a single company is that the company—

(a) disregarding any incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades, and

(b) is carrying on a qualifying trade or preparing to do so.

(2) The trading activities requirement in the case of a parent company is that—

(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

(b) at least one group company—

(i) disregarding any incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades, and

(ii) is carrying on a qualifying trade or preparing to do so.

(3) 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.

(4) For the purposes of determining whether a company falls within sub-paragraph (1)(a) or (2)(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—

(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, and

(b) in the case of a group company, any activities within sub-paragraph (5).

(5) 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—

(a) the holding of shares in or securities of, or the making of loans to, another group company; or

(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; or

(c) incidental activities of a company which meets the trading activities requirement for a single company.

(6) In sub-paragraph (2)(a) “non-qualifying activities” means—

(a) excluded activities other than—

(i) the letting of ships to which paragraph 21 applies (ships other than oil rigs or pleasure craft) in circumstances where the requirements of sub-paragraph (2) of that paragraph are met; or

(ii) the receiving of royalties or licence fees within paragraph 22 in circumstances where the requirements mentioned in sub-paragraph (2) of that paragraph are met; or

(b) activities carried on otherwise than in the course of a trade.

(7) In this paragraph—

(a) “incidental purposes” means purposes having no significant effect (other than in relation to incidental matters) on the extent of the company’s activities; and

(b) “incidental activities” means activities carried on in pursuance of incidental purposes.