SCHEDULES

SCHEDULE 5Enterprise management incentives

Part 3Qualifying companies

The trading activities requirement: parent company

14

1

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

a

at least one group company—

i

disregarding any purposes within sub-paragraph (4), 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, and

b

the business of the group does not consist (either wholly or as to a substantial part) in the carrying on of non-qualifying activities.

2

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.

3

For the purpose of determining the business of a group, activities of a group company are to 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,

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 (see paragraph 13).

4

The purposes referred to in sub-paragraph (1)(a)(i) are—

a

the carrying on of any activities within sub-paragraph (3), and

b

any purposes having no significant effect (other than in relation to incidental matters) on the extent of the company’s activities.

5

In this paragraph—

a

group company” means any member of the group;

b

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

c

non-qualifying activities” means—

i

excluded activities, or

ii

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

6

This paragraph is supplemented by paragraph 15 (meaning of “qualifying trade”) read with paragraphs 16 to 23 (excluded activities).