Section 257MN — Income Tax Act 2007: The social enterprise must carry on the chosen trade

The social enterprise must carry on the chosen trade 257MN 1 There must not be a time in the shorter applicable period when—

a the chosen trade, or b relevant preparation work, is carried on by a person who is neither the social enterprise nor a 90% social subsidiary of the social enterprise.

2 If relevant preparation work is carried out in the shorter applicable period by the social enterprise or a 90% social subsidiary of the social enterprise then, for the purposes of determining whether the requirement in subsection (1) is met, ignore any carrying-on of the chosen trade that takes place in that period before the trade begins to be carried on by a person who is the social enterprise or a 90% social subsidiary of the social enterprise.

3 The requirement in subsection (1) is not regarded as failing to be met if, merely because of any act or event within subsection (4), the chosen trade—

a ceases to be carried on in the shorter applicable period by the social enterprise or any 90% social subsidiary of the social enterprise, and b it is subsequently carried on in that period by a person who is not any time in the longer applicable period connected with the social enterprise.

4 The acts and events within this subsection are—

a anything done as a consequence of the social enterprise or any other company being in administration or receivership, and b the social enterprise or any other company being wound up, or dissolved without being wound up.

5 Subsection (4) applies only if—

a the entry into administration or receivership, and everything done as a consequence of the company concerned being in administration or receivership, or b the winding-up or dissolution, is for genuine commercial reasons, and is not part of any arrangements the main purpose or one of the main purposes of which is the avoidance of tax.

6 This section does not apply if the social enterprise is an accredited social impact contractor.