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. VCT
Paragraph 4 of Schedule 28B to ICTA defines a “qualifying trade” and lists a number of activities that may prevent a trade being a qualifying trade. The list includes in paragraph 4(2)(b) the activity of:
“dealing in goods otherwise than in the course of an ordinary trade of wholesale or retail distribution”
Paragraph 4(3) and (4) of Schedule 28B to ICTA interpret an ordinary trade of wholesale or retail distribution. Paragraph 4(4) refers to “that person“ in sub-paragraphs (a) to (h): “that person” is the person who carries on the trade. The reference in paragraph 4(4)(c) to the “case of a trade carried on by a company” concerns a distinct subset of “the trader”.
Paragraph 4(3)(c)(ii) of Schedule 28B to ICTA is an exception to paragraph 4(4) of that Schedule 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 paragraph 4(2)(f) of Schedule 28B to ICTA to paragraph 4(3)(c)(ii) of that Schedule.
Paragraph 4(2)(f) of Schedule 28B to ICTA concerns the activity of:
“providing services or facilities for any such trade carried on by another person … (which) consists to a substantial extent, in activities within any of paragraphs (a) to (ee) above and is a trade in which a controlling interest is held by a person who also has a controlling interest in the trade carried on by the company providing the services or facilities.”
The reference in this sub-paragraph to a “trade carried on by another person” means that paragraph 4(2)(f) of Schedule 28B to 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 paragraph 4(3)(c)(ii) of that Schedule.
In section 304(5)(b) of this Act the rewrite of paragraph 4(3)(c)(ii) of Schedule 28B to ICTA 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.”