ANNEX 1:: MINOR CHANGES IN THE LAW MADE BY THE BILL This change is adverse to some taxpayers in principle. But it is expected to have no practical effect as it is in line with current practice. EIS
Section 297 of ICTA defines a “qualifying trade” and lists a number of activities that may prevent a trade being a qualifying trade. The list includes in section 297(2)(b) the activity of:
“dealing in goods otherwise than in the course of an ordinary trade of wholesale or retail distribution”
Section 297(3) of ICTA interprets an ordinary trade of wholesale or retail distribution. Section 297(3)(d) of ICTA refers to “the trader” in each of its sub-paragraphs (i), (ii), (iii), (iv), (vi) and (viii) that deal with identity. The reference in section 297(3)(d)(iii) to the “case of a trade carried on by a company” concerns a distinct subset of “the trader”.
Section 297(3)(c)(ii) is an exception to the rest of section 297(3) of ICTA because it refers to goods held by the company:
“A substantial proportion of goods is held by the company for a period…”
This wording could restrict the application of section 297(2)(g) of ICTA to section 297(3)(c)(ii) of that Act.
Section 297(2)(g) of ICTA concerns the activity of:
“providing services or facilities for any trade carried on by another person … which consists to any substantial extent of activities within any of paragraphs (a) to (fe) above and in which a controlling interest is held by a person who also has a controlling interest in the trade carried on by the company ...”
The reference in this sub-paragraph to a “trade carried on by another person” means that section 297(2)(g) of ICTA is clearly applicable in the case where the person carrying on that trade is not a company. But it is not as clearly applicable to a non-corporate person in the particular circumstances of section 297(3)(c)(ii) of ICTA.
The rewrite of section 297(3)(c)(ii) of ICTA in section 193(5)(b) is as follows:
“a substantial proportion of those goods are held for a period which is significantly longer than the period for which the trader would reasonably be expected to hold them while trying to dispose of them at their market value.”