What is the trading requirement under section 79 of the Corporation Tax Act 2010?

The trading requirement is one of four conditions a company must satisfy throughout the relevant period to be treated as a qualifying trading company for share loss relief purposes. A standalone company must exist wholly for carrying on one or more qualifying trades, ignoring incidental purposes with no significant effect on its activities.

How does a parent company with qualifying subsidiaries meet the trading requirement under CTA 2010 s 79?

For a parent company with qualifying subsidiaries, the group's combined business is assessed as a single enterprise. The trading requirement is met provided that business does not consist wholly or substantially of non-qualifying activities, which include excluded activities and non-trading activities other than research and development carried on outside the course of a trade.

Which intra-group activities are disregarded when assessing the trading requirement for a group?

When assessing a group's business, certain activities are disregarded: holding shares in qualifying subsidiaries, making loans to group companies, holding property used for qualifying trades by group companies, and holding property used for qualifying research and development. Activities of mainly trading subsidiaries that fall outside their main trading purpose are also ignored.

Can a company without qualifying subsidiaries be treated as a parent company under section 79?

Yes. A company that intends to acquire qualifying subsidiaries to carry on qualifying trades is treated as a parent company for these purposes. The group is taken to include existing or future companies that will become qualifying subsidiaries. However, this forward-looking treatment ceases immediately if the company abandons that intention.

Corporation Tax Act 2010 section 79

The trading requirement

Section 79 sets out the trading requirement, which is one of four conditions a company must satisfy throughout the relevant period to be treated as a qualifying trading company for the purposes of share loss relief.

A standalone company must exist wholly for the purpose of carrying on one or more qualifying trades, ignoring any incidental purposes that have no significant effect on its activities.
If the company is a parent company with qualifying subsidiaries, the group's combined business must not consist wholly or substantially of non-qualifying activities such as excluded activities or non-trading activities (other than research and development).
A company that intends to acquire qualifying subsidiaries to carry on qualifying trades is treated as a parent company for these purposes, but this treatment ceases if the intention is abandoned.
Certain intra-group activities are disregarded when assessing the group's business, including holding shares in qualifying subsidiaries, making loans to group companies, and holding property used for qualifying trades or qualifying research and development.

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