CG17921e - Taper relief: anti-avoidance rules - periods of inactivity - the meaning of active

Paragraph TCGA92/SchA1/Para11A (2) details when a company is "active" for the purposes of the paragraph but this is subject to paragraph TCGA92/SchA1/Para11A (4).

A company is regarded as active at any time when it is carrying on a business of any description. Business has a wider meaning than trade and may include property investment and rental.

Any time when a company is a trading company, or the holding company of a trading group, will be a time when that company is active, for TCGA92/SchA1/Para11A purposes.

A company will also be regarded as active when it is preparing to carry on a business of any description. Whether or not it is preparing to carry on a business is a question of fact. At one extreme the directors of a company may simply get together once a year to agree that the company will do nothing in the coming year unless a business opportunity arises. That company would not be `active' for TCGA92/SchA1/Para11A purposes. By comparison, the directors of another company may have identified a specific business opportunity and be in negotiation to finance and start up or acquire a business. This would be an active company for TCGA92/SchA1/Para11A purposes.

A company will also be active when it or another person is winding up the affairs of a business of any description that it has ceased to carry on. This will include the formal winding up of the company by a liquidator. But a company that is in liquidation and where there are no winding up activities, and there are no other activities, is unlikely to be active.

A company will also be active where the directors, or some other person, are dealing with the post-cessation business affairs of the company and the company remains in being. This will usually involve paying off creditors, closing bank accounts, selling off assets etc. And it will include cases where the company is intended to remain in being in order to start another business later, but there is to be a gap between winding up the first business and starting the next: the time spent winding up the affairs of the first business counts as active. Alternatively, a company previously engaged in one trade or business, may do nothing for a time and subsequently start a new trade or business. Only the middle period, during which the company is neither settling the affairs of the earlier business nor preparing to start the later business, is "inactive".

CG17921f explains that a company will be treated as being "active" in certain specific situations.

TCGA92/SchA1/Para11A (4) describes certain activities which will not count as activities for the purposes of TCGA92/SchA1/Para11A (2) where all or any of these are the company's only activities. These activities are explained at CG17921g.