Is This a New Trade for SEIS purposes

Is This a New Trade for SEIS purposes

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Our local village pub is closing. The existing landlord is retiring when his lease expires later this year.

If members of the local community form an SEIS limited company to take out a new lease with the freeholder to operate the pub would this constitute a new trade (or merely the transfer of the existing trade).

SEIS guidance on the HMRC website says:

"any trade being carried on by the company at the date of issue of the relevant shares, must be less than 2 years old at that date. That condition applies whether the trade was first begun by the company, or whether it was first begun by another person who then transferred it to the company.

The new company would be unconnected with the previous landlord and there would be no transfer of the business from the landlord to the new company. (It is not a transfer of an existing lease, it is the taking out of a new lease with the free-holder when the old lease expires).

I would like to think this is the same as a retailer closing down and a new retailer opening up a business in the old shop. However, I can see it being argued that it is the continuation of the previous pub business.

1. As described would this qualify as a new trade for SEIS purposes

2. If not, would it qualify if the pub physically closed for a period and then re-opened later. (If so how long would the old trade have to cease for)

3. Would it make any difference if the pub was re-branded with a new name and a new food/drink proposition ?

Thanks for any advice.

Replies (5)

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By Steve Kesby
18th Feb 2014 13:50

I don't think so

Newco will be selling the same stuff to the same people as the current owner.

The test in ITA 2007 is one of whether:

the trade is acquired, orthe whole, or the greater part, of the assets used for the purposes of the trade are acquired.

It doesn't mention from whom they have to be acquired, so it does seem to me to fail the second part of the test.

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By Steve Kesby
18th Feb 2014 14:14

Well, in that case ask

Give the SCEC a call (see HERE) with your pub's precise circumstances and see if they'll give you something in writing before you set a company up, and when you have a company get advance assurance.

EDIT: Actually, you're correct that the point is only of issue if the trade before and after is controlled by a common group. Ignore me!

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By MBK
19th Feb 2014 13:09

The actual legislation here...

... is at S257HF of ITA 2007 - which says you must have a "new qualifying trade".

As a question of fact you have a new trade every time there is a break in trading from the premises. So you are quite right - what you will have is the same type of trade, but carried on by a new person so there is a new trade.

All the legislation says is that you can't raise SEIS money either where:-

a) The company has already been carrying on the trade for two years OR

b) The company acquires a trade from someone else who has already carried it on for two years.

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By win1
09th Feb 2017 14:25

Hi,

I know this is a little old now, but i am in a similar position. Has anyone had any more clarity on this? My main concern is how long the gap in trading has to be? and does it matter if the gap is before the new company purchases or after? ie if the current owner was to stay open til he sold and then we closed it to renovate / rebrand / get new suppliers etc. would it be ok, or does the business have to be closed for a while before the purchase?

Thanks

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