VCM17010 - Qualifying trades: whether activities are a trade

ICTA/S298 (3); ITA/S189 (2); ITA/S300 (4); ITA/S313 (3)

For all the venture capital schemes, either the company or at least one of its qualifying subsidiaries must exist for the purpose of carrying on a qualifying trade.

For the EIS and the VCT scheme, what the company does must come within the ordinary meaning of ‘trade'; that is, it must not count as a trade merely because of the extension of the meaning of that word in ITA/S989 to include ‘any venture in the nature of trade’.

In deciding whether a business is a trade what matters is whether it is actually, or is treated for all purposes of the Taxes Acts as, a trade, not whether the profits from it are assessable under Case I.

Thus:

• concerns, such as quarries and gravel pits, whose profits arise out of land and which are brought into Case I by ICTA/S55 are not necessarily trades; each case must be considered on its merits,
• the commercial letting of furnished holiday accommodation, which is treated under ICTA/S503 as a trade for certain purposes only, is not a trade.