Income Tax Act 2007 section 193

Excluded activities: wholesale and retail distribution

Section 193 defines what counts as wholesale and retail distribution for the purposes of the Enterprise Investment Scheme, and sets out how to determine whether such a trade is an "ordinary" trade of distribution or one that is treated as an excluded activity.

• Wholesale distribution means selling goods to others for resale (or processing and resale) to the general public; retail distribution means selling goods directly to the public for their use or consumption.
• A distribution trade is not "ordinary" if it substantially involves dealing in goods held as investments, or those goods are held for significantly longer than would be expected when trying to sell them at market value.
• Positive indicators of an ordinary trade include buying in bulk and selling in smaller quantities, operating across different markets, and employing staff with genuine business expenses beyond the cost of goods.
• Negative indicators include trading with connected persons, matching purchases to forward sales, holding goods for unusually long periods, trading from atypical premises, and never taking physical possession of the goods.

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