Part 13

Tax avoidance
CHAPTER 5E

Disguised investment management fees

Meaning of “management fee” in section 809EZA
809EZB
1
Subject as follows, for the purposes of section 809EZA “
management fee
” means any sum (including a sum in the form of a loan or advance or an allocation of profits) except so far as the sum constitutes—
a
a repayment (in whole or part) of an investment made directly or indirectly by the individual in the scheme,
b
an arm's length return on an investment made directly or indirectly by the individual in the scheme, or
c
carried interest which is not income-based carried interest (see sections 809EZC and 809EZD for carried interest, and Chapter 5F for income-based carried interest).
2
For the purposes of subsection (1)(b) a return on an investment is “an arm's length return” if—
a
the return is on an investment which is of the same kind as investments in the scheme made by external investors,
b
the return on the investment is reasonably comparable to the return to external investors on those investments, and
c
the terms governing the return on the investment are reasonably comparable to the terms governing the return to external investors on those investments.
2A
For the purposes of subsection (2)(b), the return on the investment is reasonably comparable to the return to external investors on the investments referred to in subsection (2)(a) if (and only if)—
a
the rate of return on the investment is reasonably comparable to the rate of return to external investors on those investments, and
b
any other factors relevant to determining the size of the return on the investment are reasonably comparable to the factors determining the size of the return to external investors on those investments.
3
In this Chapter “
sum
” includes any money or money's worth (and other expressions are to be construed accordingly).
4
Where—
a
a sum in the form of money's worth arises to the individual from the scheme in the ordinary course of the scheme's business, and
b
the individual gives the scheme money in exchange for the sum,
the sum constitutes a “management fee” only to the extent that its market value at the time it arises exceeds the amount of the money given by the individual.
S. 809EZB(2A) inserted (with effect in accordance with s. 44(3) of the amending Act) by Finance (No. 2) Act 2015 (c. 33), s. 44(1)
S. 809EZB(1)(c) substituted (with effect in accordance with s. 37(4) of the amending Act) by Finance Act 2016 (c. 24), s. 37(1)
Pt. 13 Ch. 5E inserted (with effect in accordance with s. 21(4) of the amending Act) by Finance Act 2015 (c. 11), s. 21(1)