Income Tax Act 2007 section 290

The trading requirement

Section 290 sets out the trading requirement that a company must satisfy for Venture Capital Trust (VCT) purposes, ensuring the company or its group exists primarily to carry on qualifying trades rather than non-qualifying activities.

• A standalone company must exist wholly to carry on one or more qualifying trades (ignoring any incidental purposes), or if it is a parent company, the group's business must not consist wholly or substantially of non-qualifying activities.
• If a company intends to acquire qualifying subsidiaries to carry on qualifying trades, it is treated as a parent company for these purposes, and the group definition extends to include those future subsidiaries — but only for as long as that intention is maintained.
• When assessing the group's business, all group companies' activities are treated as a single business, and certain holding activities — such as holding shares in subsidiaries, making intra-group loans, and managing property used for qualifying trades or related research and development — are disregarded.
• Non-qualifying activities are defined as excluded activities (listed in sections 303 to 310) and any activities carried on otherwise than in the course of a trade; the meaning of a qualifying trade is set out in section 300.