Section 738 Meaning of “commercial transaction”

(1)

For the purposes of section 737, a relevant transaction is a commercial transaction only if it meets the conditions in subsections (2) and (3).

(2)

It must be effected—

(a)

in the course of a trade or business and for its purposes, or

(b)

with a view to setting up and commencing a trade or business and for its purposes.

(3)

It must not—

(a)

be on terms other than those that would have been made between persons not connected with each other dealing at arm's length, or

(b)

be a transaction that would not have been entered into between such persons so dealing.

(4)

For the purposes of subsection (2), making investments, managing them or making and managing them is a trade or business only so far as—

(a)

the person by whom it is done, and

(b)

the person for whom it is done,

are persons not connected with each other and are dealing at arm's length.

Notes on Chapter 2

C1: Pt. 13 Ch. 2 applied by 1988 c. 1, s. 762ZA (as inserted (21.7.2008 with effect in accordance with Sch. 7 para. 98 of the amending Act) by Finance Act 2008 (c. 9), Sch. 7 para. 94)
C2: Pt. 13 Ch. 2 applied (with effect in accordance with art. 1(2)(3) Sch. 1 of the amending S.I.) by The Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), regs. 1(1), 21
C3: Pt. 13 Ch. 2 modified (for the tax year 2025-26 and subsequent tax years) by Finance Act 2025 (c. 8), Sch. 10 paras. 10(9), 11
C4: Pt. 13 Ch. 2 modified (retrospective to 6.4.2025 for the tax year 2025-26 and subsequent tax years) by Finance Act 2026 (c. 11), s. 53(1)-(7)(10)