Q&As

Can the exploitation of intellectual property be a trading activity for the purposes of entrepreneurs’ relief?

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Published on LexisPSL on 09/02/2018

The following Tax Q&A provides comprehensive and up to date legal information covering:

  • Can the exploitation of intellectual property be a trading activity for the purposes of entrepreneurs’ relief?

This Q&A considers whether exploitation of intellectual property (IP) can be a trading activity so that it is a ‘trading company’ for the purposes of determining whether a disposal is a material disposal for entrepreneurs’ relief. Details of the trading test and when it applies are found in Practice Note: CGT—business asset disposal relief (formerly entrepreneurs' relief).

A company is a trading company under section 165A(3) of the Taxation of Chargeable Gains Act 1992 (TCGA 1992) if it is carrying on trading activities whose activities do not include to a substantial extent activities other than trading activities.

Trading activities are defined as, among other things, activities carried on in the course of or for the purposes of a trading being carried on by it. The other elements of trading activities relate to preparing or starting to carry on a trade or acquire a company carrying on a trade and are not considered further in this Q&A.

Trade is defined in TCGA 1992, s 165A(14) as anything which:

  1. is a trade, profession or

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