CG53120 - Substantial shareholdings exemption: the trading company/group/subgroup requirements - dealing with requests for opinions on the trading status of companies, groups and subgroups

TCGA92/SCH7AC/PARA20, TCGA92/SCH7AC/PARA21 & TCGA92/SCH7AC/PARA22

Companies may want some confirmation that they qualify as trading companies, that the groups they head are trading groups, that they are the holding company of a trading group or that a company they hold shares in is a trading company or the holding company of a trading subgroup. Guidance on what is a trading company for the purposes of SSE can be found at CG53110  

  

If a company asks you about the status of some other company you should bear in mind the duty of confidentiality you owe to all taxpayers. Normally companies who want to know about the status of other companies should approach those companies for this information. 

  

A company (the investing company) may want to establish whether another company (the company invested in) in which it held shares (or interest in shares or assets related to shares) which they have now disposed of, was a qualifying company. In the first instance the investing company should seek advice from the company invested in. That company will usually be able to say if its activities were such that it was a trading company, the holding company of a trading group or trading subgroup within the meaning of the legislation. The investing company will need to take a view as to the application of the exemption (in conjunction with the guidance) and prepare their return on that basis in accordance with ordinary self-assessment principles. 

  

You may receive enquiries from companies requiring confirmation of their own status. This may be because they are about to make a disposal and want to know if they qualify as an investing company, or because some other company has asked them about their status for some reason. In the vast majority of cases the company should be able to determine its own trading status, and if there is a substantial amount of non-trading activity, which is ultimately questions of fact.   

  

Most companies will engage in some non-trading activities.  The legislation provides that where a company engages in non-trading activities, the company will still be considered a trading company for the purposes of the relief if their activities “do not include to a substantial extent activities other than trading activities”.  Further information about how to consider if there is a substantial amount of non-trading activity can be found at CG53116 onwards 

  

If there remains difficulty in determining whether a company qualifies for the relief, and this difficulty stems from uncertainty over HMRC’s interpretation of tax legislation, rather than a question of fact, the company can seek from HMRC an opinion under the terms of the Other Non-Statutory Clearance service.  Further information can be found at Non-Statutory Clearance Service - GOV.UK (www.gov.uk).