EIM03055 - Employee Ownership Trusts – qualifying bonus payments: the trading requirement

Section 312D ITEPA 2003

As noted earlier in order to make qualifying bonus payments, the employer needs to be a company. Section 312D requires that the company must be either a trading company or a member of a trading group.

Trading companies meet this requirement if their activities do not include to a substantial extent any activities other than trading activities.

Trading activities are defined as activities carried on by the company in the course of, or for the purposes of, a trade carried on by it.

A trading group will meet this requirement if they are a group consisting of one or more members who carry on trading activities and the activities of whose members do not include to a substantial extent, activities other than trading group activities.

Trading group activities are defined as activities carried on by a member of the group in the course of, or for the purposes of, a trade carried on by any member of the group.

The activities of a group are to be treated as one business so any intra-group activities are disregarded for the purposes of this requirement.

A business carried on in partnership with one or more other persons is treated as not being a trading activity.