Income Tax Act 2007 section 257MJ

The trading requirement

Section 257MJ sets out the trading requirement that a social enterprise must satisfy in order for investors to qualify for social investment tax relief.

• The social enterprise must meet the trading requirement throughout the shorter applicable period, unless it is an accredited social impact contractor
• A social enterprise that is a charity automatically satisfies the requirement; a single non-charity company must carry on trade (not excluded activities) as its substantive business; a non-charity parent company's group must not consist wholly or substantially of non-qualifying activities
• Where a social enterprise intends to set up qualifying subsidiaries to carry on qualifying trades, it is treated as a parent company and its 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 subsidiaries, making loans to group companies, and holding property used for qualifying trades