Part VII Other property, businesses, investments etc.

F1Employee-ownership trusts

236NLimited participation requirement

(1)

The limited participation requirement is met if Conditions A and B are met.

(2)

Condition A is that there was no time in the period of 12 months ending immediately after the disposal mentioned in section 236H(1) when—

(a)

P was a participator in C, and

(b)

the participator fraction exceeded 2/5.

(3)

Condition B is that the participator fraction does not exceed 2/5 at any time in the period beginning with that disposal and ending at the end of the tax year in which it occurs.

(4)

But a time which falls in a period during which the participator fraction exceeded 2/5 is to be disregarded for the purposes of subsection (2)(b) and (3) if—

(a)

that period lasts no more than 6 months, and

(b)

the fraction exceeded 2/5 during that period by reason of events outside the reasonable control of the trustees.

(5)

“The participator fraction” means—

NPNE

where—

NP is the sum of—

  1. (a)

    the number of persons who at the time in question are both—

    1. (i)

      participators in C, and

    2. (ii)

      employees of, or office-holders in, C, and

  2. (b)

    the number of other persons who at that time are both—

    1. (i)

      employees of, or office-holders in, C or, if C is the principal company of a trading group, any member of the group, and

    2. (ii)

      connected with persons within paragraph (a);

NE is the number of persons who at that time are employees of C or, if C is the principal company of a trading group, any member of the group.

(6)

The participators in C who are referred to in subsections (2) and (5) do not include any participator who—

(a)

is not beneficially entitled to, or to rights entitling the participator to acquire, 5% or more of, or of any class of the shares comprised in, C’s share capital, and

(b)

on a winding-up of C would not be entitled to 5% or more of its assets.

(7)

In this section—

(a)

“participator” has the meaning given by section 454 of CTA 2010, and

(b)

references to a participator in a company are, in the case of a company which is not a close company (within the meaning of Chapter 2 of Part 10 of that Act), to be construed as references to a person who would be a participator in the company if it were a close company.