Income Tax Act 2007

396 Loan to buy interest in employee-controlled company

(1) This section applies to a loan to an individual that is used in one or more of the ways specified in subsection (2).

(2) The ways are—

(a) acquiring part of the ordinary share capital of a company that—

(i) first becomes an employee-controlled company after the acquisition, or

(ii) first became such a company not later than 12 months before the acquisition, and

(b) repaying another loan to which this section applies.

(3) For the purposes of this section and section 397, a company is employee-controlled at any time when—

(a) more than 50% of the issued ordinary share capital of the company is owned beneficially by persons who are full-time employees of the company, and

(b) more than 50% of the voting power in the company is so owned.

(4) If an individual owns beneficially more than 10% of the issued ordinary share capital of, or voting power in, a company, for the purposes of subsection (3) the excess is treated as being owned by an individual who is not a full-time employee of the company.

(5) In this section and section 397 “full-time employee”, in relation to a company, means an individual the greater part of whose time is spent working as an employee or director of the company or of a 51% subsidiary of the company.

(6) This section is subject to section 411 (ineligibility of interest where business is occupation of commercial woodlands).