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Allam: new light on the test for trading activities

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Business asset disposal relief (and its predecessor entrepreneurs’ relief) is precluded when a company’s activities ‘include to a substantial extent activities other than trading activities’. Until recently the only case on this issue was the First-tier Tribunal decision in Potter in which the FTT focused on the statute’s use of the word ‘activities’ and found that this requires an assessment of what the company actually does. The FTT drew a distinction between investments that require some work (such as letting property or actively managing investments) and the type of investment bond in that case which simply locked money away until the bonds matured. This test was recently revisited by the Upper Tribunal in Allam. Here the UT found the test to be a holistic one having regard to the commercial activities of the company and not just at the physical activities of the directors. Contrary...
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