Income Tax Act 2007 section 137

The trading requirement

Section 137 sets out the trading requirement that a company must satisfy in order to be a qualifying trading company for the purposes of loss relief on disposal of shares.

• 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).
• Where the company is a parent company with qualifying subsidiaries, the group's business — viewed as a single combined enterprise — must not consist wholly or substantially of non-qualifying activities such as excluded activities or non-trade 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, and the future subsidiaries are included in the group assessment — but only for as long as that intention is maintained.
• Certain intra-group activities are disregarded when assessing the group's business, including holding shares in or making loans to group companies, and holding or managing property used for qualifying trades or for research and development intended to benefit a qualifying trade.