Section 257MJ | The trading requirement

(1)The social enterprise must meet the trading requirement throughout the shorter applicable period, but this does not apply if the social enterprise is an accredited social impact contractor.

(2)The trading requirement is that—

(a)the social enterprise is a charity,

(b)the social enterprise is a single company that is not a charity, and its business—

(i)does not, if things done for incidental purposes are ignored, consist to any extent in the carrying-on of non-trade activities, and

(ii)does not consist wholly, or as to a substantial part, in the carrying-on of excluded activities, or

(c)the social enterprise is a parent company that is not a charity, and the business of the group does not consist wholly, or as to a substantial part, in the carrying-on of non-qualifying activities.

(3)If the social enterprise intends that one or more companies should become its qualifying subsidiaries with a view to their carrying on one or more qualifying trades—

(a)the social enterprise is treated as a parent company for the purposes of subsection (2)(b) and (c), and

(b)the reference in subsection (2)(c) to the group includes the social enterprise and any existing or future company that will be its qualifying subsidiary after the intention in question is carried out,

but this subsection does not apply at any time after the abandonment of that intention.

(4)For the purposes of subsection (2)(c) “the business of the group” means what would be the business of the group if the activities of the group companies taken together were regarded as one business.

(5)For the purposes of determining the business of a group, activities of a group company are ignored so far as they are activities carried on by a mainly trading subsidiary otherwise than for its main purpose.

(6)For the purposes of determining the business of a group, activities of a group company are ignored so far as they consist in—

(a)the holding of shares in or securities of a qualifying subsidiary of the parent company,

(b)the making of loans to another group company, or

(c)the holding and managing of property used by a group company for the purpose of one or more qualifying trades carried on by a group company.

(7)In this section—

“incidental purposes” means purposes having no significant effect (other than in relation to incidental matters) on the extent of the activities of the body in question,

“mainly trading subsidiary” means a qualifying subsidiary which, apart from incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades, and any reference to the main purpose of such a subsidiary is to be read accordingly,

“non-qualifying activities” means—

(a)excluded activities, and

(b)activities, other than activities carried on by a charity, that are carried on otherwise than in the course of a trade, and

“non-trade activities” means activities which are neither of the following—

(a)activities carried on in the course of a trade, and

(b)activities carried on in the course of preparing to carry on a trade.