Income Tax Act 2007 section 257DA

The trading requirement

Section 257DA sets out the trading requirement that the issuing company must satisfy throughout period B (and since its incorporation) under the Seed Enterprise Investment Scheme, ensuring it exists to carry on new qualifying trades or, if it heads a group, that the group's business does not substantially consist of non-qualifying activities.

• The company must exist wholly for the purpose of carrying on one or more new qualifying trades (ignoring incidental purposes), or if it is a parent company, the group's business must not consist wholly or substantially of non-qualifying activities.
• If the company intends to set up qualifying subsidiaries to carry on new qualifying trades, it is treated as a parent company for these purposes, and the planned subsidiaries are included in the group — but this treatment ceases if the intention is abandoned.
• When assessing the group's business, the activities of all group companies are looked at together as a single business, and certain intra-group activities (such as holding shares in subsidiaries, making inter-company loans, and managing property used for qualifying trades or related research and development) are disregarded.
• The trading requirement must have been met since the company's incorporation, although any interval between incorporation and the date it actually commenced business is ignored.