Income Tax Act 2007 section 257MN

The social enterprise must carry on the chosen trade

Section 257MN requires that during the shorter applicable period, the chosen qualifying trade (or relevant preparation work for it) must be carried on only by the social enterprise itself or its 90% social subsidiary, with certain exceptions for insolvency events.

• During the shorter applicable period, neither the chosen trade nor relevant preparation work may be carried on by anyone other than the social enterprise or its 90% social subsidiary
• Where the social enterprise or its 90% social subsidiary carries out preparation work during the period, any earlier carrying-on of the trade by someone else before the social enterprise takes it over can be disregarded
• The requirement is not treated as breached if the trade passes to an unconnected person solely because of genuine administration, receivership, winding-up or dissolution that is not part of a tax avoidance arrangement
• This section does not apply where the social enterprise is an accredited social impact contractor