CG53007 - Substantial shareholdings exemption: interpretation - trade
Throughout this manual, all legislative references are to Taxation of Chargeable Gains Act 1992 (“TCGA92”) unless otherwise stated.
Paragraph 27 of Schedule 7AC explains what is meant for the purposes of the substantial shareholdings exemption legislation by ‘trade’. It means anything that
· is a trade, profession or vocation within the meaning of the Income Tax Acts (including activities such as farming that are treated as a trade by section 36 Corporation Tax Act 2009 and section 1125 Corporation Tax Act 2010), provided
· it is conducted on a commercial basis and with a view to the realisation of profits.
Furnished Holiday Lettings (FHL)
In addition, up to 31 March 2025 a property business that consists of the commercial letting of furnished holiday accommodation in the United Kingdom or the European Economic Area was treated as a trade for the purposes of Schedule 7AC (sections 241 & 241A - see CG73500).
Paragraph 20 of Schedule 5 Finance Act 2025 deals with the abolition of the FHL regime for SSE purposes. It modifies the “look back” provision in paragraph 3(2)(d) of Schedule 7AC where a share disposal takes place on or after 1 April 2025. The FHL rules are disregarded when considering this provision.
Example – Company A holds a substantial shareholding in company B. Company B operates both a small hotel and a significant FHL business. Company A sells its shareholding in January 2026. At the time of the disposal company B will not be treated as a trading company because it has a substantial non-trading activity following the abolition of the FHL rules. Nor will it be treated as trading at a time within the two years preceding the disposal.