VCM17020 - Qualifying trades: General

ICTA/S297 (8); ITA/S189 (1); ITA/S300 (1); FA00/SCH15/PARA25

For a trade to be a qualifying trade, it must be conducted on a commercial basis and with a view to the realisation of profits, (ICTA/S297 (8) & ITA/S189 (1)) - see the guidance at BIM75705 and BIM75710).

For the CVS, a trade is not a qualifying trade unless it is carried on wholly or mainly in the United Kingdom (see VCM20020).

For the EIS and the VCT scheme, there is the same requirement but it is not part of the definition of a qualifying trade. For shares issued on or after 6 April 2011 there is no longer a requirement that the trade be carried on wholly or mainly in the United Kingdom. Instead, the requirement is that the issuing company must have a permanent establishment in the UK (see VCM17025).

Subject to the above matters, all trades are qualifying trades except as set out in VCM17030.

For all the schemes activities of research and development from which it is intended that a “connected“ qualifying trade will be derived or will benefit is itself treated as a qualifying trade. (A “connected” qualifying trade is one carried on by the company that undertakes the research and development or any other member of the same group). Preparing to carry on research and development does not count as preparing to carry on a qualifying trade (see ICTA/S289(2), ITA/S179, ITA/S300 and FA00/SCH15/PARA25.