Income Tax Act 2007 section 257DB

Ceasing to meet trading requirement: administration etc

Section 257DB protects a company's trading status for SEIS purposes when it enters administration, receivership, or is wound up, provided this is done for genuine commercial reasons and not as part of a tax avoidance arrangement.

• A company is not treated as failing the trading requirement simply because of actions taken as a consequence of the company or any of its subsidiaries being in administration or receivership.
• This protection only applies if the entry into administration or receivership, and everything done as a result, is for genuine commercial reasons and not part of a scheme whose main purpose (or one of whose main purposes) is tax avoidance.
• However, the company will cease to meet the trading requirement if, before the end of period B, it or any of its subsidiaries is wound up or dissolved — unless the winding up or dissolution is itself for genuine commercial reasons and not part of a tax avoidance arrangement.
• The key test throughout is whether actions are commercially motivated rather than driven by tax avoidance purposes.