Income Tax Act 2007 section 138

Ceasing to meet trading requirement because of administration or receivership

Section 138 explains when a company in administration or receivership is still treated as meeting the trading requirement for the purposes of share loss relief, and when it is not.

• A company does not fail the trading requirement merely because it or a subsidiary enters administration or receivership, provided the entry and all consequent actions are for genuine commercial reasons and not primarily aimed at tax avoidance.
• However, the company will fail the trading requirement if, before the relevant time under section 134(2), a winding-up resolution or order is made, or the company or a subsidiary is dissolved without winding up.
• The winding-up rule does not apply if the winding up is for genuine commercial reasons, is not part of a tax avoidance scheme, and the company continues to be a trading company throughout the winding-up process.
• The terms "in administration" and "in receivership" take their meanings from section 252 of the Income Tax Act 2007.