ANNEX 1:: MINOR CHANGES IN THE LAW MADE BY THE BILL The Change in section 179(7)
Section 289(1)(b) of ICTA, rewritten as section 174, requires that the relevant shares be issued in order to raise money for the purpose of a qualifying business activity. Section 179 of this Act is based on section 289(2) and (3A) of ICTA and explains what is a qualifying business activity at the date of the issue of the shares.
The categories of qualifying business activity that consist of a trade in preparation and of R&D are described as follows in section 289(2) of ICTA (emphasis added):
“In this Chapter “qualifying business activity”, in relation to a company, means—(a)the company or any qualifying 90% subsidiary of that company—(i)…(ii)preparing to carry on, or carrying on, a qualifying trade which, on that date, is intended to be carried on wholly or mainly in the United Kingdom by the company or any such subsidiary and which is begun to be carried on by the company or any such subsidiary within two years after that date, …, or(b)the company or any qualifying 90% subsidiary of that company carrying on research and development—(i)which, on the date the shares are issued, the company or any such subsidiary is carrying on or which the company or any such subsidiary begins to carry on immediately afterwards, and(ii)from which it is intended that a qualifying trade which the company or any such subsidiary will carry on wholly or mainly in the United Kingdom will be derived,…”
There is an indication in section 289(3A)(a) of ICTA that participation in the qualifying business activity is not restricted to existing subsidiaries in relation to the commencement of the trade in section 289(2)(a)(ii) of that Act.
This is also the intention behind the references to “any such subsidiary” in section 289(2)(a)(ii) and (b)(ii) of ICTA. This phrase includes a subsidiary that is acquired after the date the shares are issued so long as other requirements such as those in section 289(1A) to (1E) of ICTA, rewritten in section 183, are met.
But to make this clearer, section 179(7) of this Act provides an interpretation of references to a qualifying 90% subsidiary:
“References in subsection (2)(b)(i) or (4)(b) to a qualifying 90% subsidiary of the company include references to any existing or future company which will be such a subsidiary at any future time.”
Section 179(2)(b)(i) rewrites the part about intention in section 289(2)(a)(ii) of ICTA. Section 179(4)(b) rewrites the part about intention in section 289(2)(b)(ii) of ICTA, (with Change 41 which extends the R&D in the frame to R&D that will benefit a qualifying trade).