VCM15040 - Trading requirement: parent companies

ICTA/S293 (2); ITA/S181; ITAS/290

ICTA/S576 (4); FA00/SCH15/PARA23

For a company to be a parent company it must have one or more qualifying subsidiaries (see VCM15060). For EIS, VCT and VC loss relief, this includes companies that become qualifying subsidiaries during the relevant period.

Non-qualifying activities carried on must not amount to a substantial (see VCM17040) part of the business. .

The way this rule is applied is as below.

The following types of activity are ignored altogether:

• holding shares in a subsidiary, making loans to a subsidiary, and making loans to the parent company,
• holding and managing property used by any group company for the purpose of a trade or of research and development,
• insignificant activities, where the particular company which carries them on exists for the purpose of carrying on a trade.

Everything else done by any company in the group constitutes ’the activities of the group taken as a whole'.

Any activities in the following categories have to be identified:

• trades, or activities which are parts of trades, which are on the list of excluded activities in VCM17030 - except where either of the waivers in VCM17310 and VCM17320 applies,
• activities which are not carried on in the course of a trade, other than research and development (for example, investment in property or shares).

Such activities must not form a substantial part of the activities of the group as a whole.