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Retention of cash by a company does not necessarily prejudice trading status, explains KEVIN SLEVIN
KEY POINTS
- The definitions of and the official guidance on trading status.
- Does the company look like a trading company?
- A trading company that retains its profits in cash will not normally be considered to have lost its trading status.
- The ability to obtain a pre-transaction clearance.
- Practitioners need to accept that there is uncertainty in the legislation.
Possession of substantial “cash at bank” is often thought to be a major determining factor when considering the issue of a company’s trading status for capital gains tax entrepreneurs’ relief purposes and also for the corporation tax substantial shareholding exemption (SSE).
This article focuses on the writer’s understanding of HMRC’s current prevailing practice as regards the trading status of cash-rich companies (and groups too) and highlights the fact that the directors...
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