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ITTOIA05/S396B and S404A (4)(d)

Condition C is met where 'the individual [who receives the distribution in a winding up] is involved with the carrying on of such a trade or activity by a person connected with the individual'.

'Involved with'

Like 'similar trade or activity', 'involved with' is not a defined term and is potentially wide in scope.  It is designed to prevent the TAAR being avoided by connected parties working together to circumvent the other conditions.

Example 1

Mrs C is an accountant who runs her business through a company.  Her husband is a self-employed lion tamer. Mrs C winds up her company and starts work for a newly-formed company owned by her husband, providing accountancy services.

Mrs C continues to be involved with the carrying on of the same trade or activity as the wound-up company was involved with (the provision of accountancy services), even though she is now an employee rather than business owner.  She is connected to her husband and so Condition C is met (and so are Conditions A and B).  Condition D will still need to be satisfied.

Example 2

Instead of going to work for a newly-formed company, Mrs C, from Example 1, goes to work for her sister’s pre-existing accountancy practice, which the sister operates as a sole trader.

Mrs C is connected with her sister, and she is continuing to be 'involved with the carrying on of' the same or a similar activity, and so Condition C is met.  Condition D will still need to be satisfied.

Example 3

Mr B is a fitness instructor who provides his services through a company.  After suffering an injury he winds up his company and starts work as a journalist.  Mr B’s wife is also a fitness instructor and she offers her services as a sole trader, before and after the winding up of her husband’s company.  Mr B provides no services to his wife’s business at all.

Mr B is not 'involved with the carrying on of' a similar trade or activity after the winding-up of the first company, even though his wife is.