Taxation of Chargeable Gains Act 1992 section 236I

Trading requirement

Section 236I sets out the trading requirement that must be met by the company whose shares are acquired by an employee ownership trust, specifying how trading status is assessed for both standalone companies and groups.

• The company must either be a standalone trading company or the principal (parent) company of a trading group — in both cases, non-trading activities must not form a substantial part of overall activities.
• A trading company is one whose activities are carried on in the course of, or for the purposes of, its trade, and whose non-trading activities are not substantial relative to its total activities.
• A trading group requires at least one member to carry on a trade, and the combined activities of all group members must not include a substantial element of non-trading activity unrelated to the trade of any group member.
• When assessing trading status, intra-group activities are disregarded by treating all group members' activities as a single business, and any business carried on by a company in partnership with others is excluded from being a trading or trading group activity.