VCM17040 - Qualifying trades: excluded activities: 'substantial part' of a trade

Whether excluded activities amount in aggregate to ‘a substantial part' of a trade is a matter of fact, to be decided in the light of all the relevant circumstances. No definition of the phrase is provided by the legislation. But where, judged by any measure which is reasonable in the circumstances of the case (normally turnover or capital employed), such activities account for more than 20% of the activities of the trade as a whole, they are regarded as amounting to a substantial part of the trade.

The phrase 'to a substantial extent', which is also used in some parts of the legislation, is interpreted in exactly the same way.

As to the attitude to be adopted where in advance of issuing shares a company whose trade will consist partly of excluded activities asks for an assurance that it will be accepted as a qualifying company, see VCM21040.