CG64100 - Business Asset Disposal Relief: trading company and holding company of a trading group - applications for a ruling on the status of a company

Entrepreneurs’ Relief was renamed in Finance Act 2020 with effect from 6 April 2020.  The new name is generally used in this guidance but should be read as applying to times before that date. 

 

Legislative amendments were made by FA2016 in relation to disposals of assets made on or after 18 March 2015. The meaning of the terms “trading company” and “trading group” were changed in relation to the sale of shares or securities by an individual (TCGA92/S169I(6) and TCGA92/S169I(7A)) and disposals of shares by a trust (TCGA92/S169J(4)).  

 

If a person wishes to establish whether a company in which they held shares or securities was a “trading company” for the purposes of qualifying for the relief whilst the shares or securities were held, that person should seek advice from the company.  The company is most likely to be able to determine its trading status, which is ultimately a question of fact.  Factors used for assessing the company’s trading status can be found at CG64055 onwards.  

 

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 can be found at CG64090. 

 

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). 

 

If during an enquiry a caseworker requires a view on the trading status of a company, the caseworker should in the first instance contact the Business Profits technical team, if a formal submission is necessary please ensure that a copy is also sent to the Capital Gains technical team.