Part 14

Income tax liability: miscellaneous rules
Chapter 1

Limits on liability to income tax of non-UK residents

The independent investment manager conditions

Application of 20% rule to collective investment schemes
824
1
This section applies if amounts arise or accrue to the non-UK resident as a participant in a collective investment scheme.
2
It applies for the purposes of determining whether the requirements of the 20% rule are met in relation to a transaction carried out for the purposes of the scheme (so far as the transaction is one in respect of which such amounts so arise or accrue).
3
In applying this section make the following assumptions—
a
that all the transactions carried out for the purposes of the scheme are carried out on behalf of a company (“the assumed company”) which is—
i
constituted for the purposes of the scheme, and
ii
non-UK resident, and
b
that the participants do not have any rights in respect of the amounts arising or accruing in respect of those transactions, other than the rights which, if they held shares in the assumed company, would be their rights as shareholders.
4
If the scheme is such that the assumed company would not be regarded for tax purposes as carrying on a trade in the United Kingdom in relation to the appropriate relevant period, the requirements of the 20% rule are treated as met in relation to a transaction carried out for the purposes of the scheme.
5
If the scheme is such that the assumed company would be so regarded for tax purposes, sections 819 to 823 have effect in relation to a transaction carried out for the purposes of the scheme with the modifications in subsection (6).
6
The modifications are—
a
for references to the non-UK resident substitute references to the assumed company, and
b
for references to the non-UK resident's relevant disregarded income for a qualifying period substitute references to the sum of the amounts that would, for relevant periods comprised in the qualifying period, be chargeable to tax on the assumed company as profits deriving from the transactions—
i
carried out by the investment manager, and
ii
assumed to be carried out on behalf of the company.
7
In this section—
- “the appropriate relevant period” is—
  1. the tax year in which the transaction income is chargeable to income tax, if this section applies for the purposes of section 813, or
  2. the accounting period in which the transaction is carried out, if this section applies for the purposes of section 816,
- “collective investment scheme” has the meaning given by section 235 of FISMA 2000,
- “participant”, in relation to a collective investment scheme, is construed in accordance with that section, and
- “relevant period” means—
  1. a tax year, if this section applies for the purposes of section 813, or
  2. an accounting period, if this section applies for the purposes of section 816.
Pt. 14 Ch. 1 excluded by 2005 c. 5, s. 608X(3)(a) (as inserted (with effect in accordance with Sch. 3 para. 7 of the amending Act) by Finance Act 2019 (c. 1), Sch. 3 para. 4)
Words in s. 824(2) inserted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 284 (with Sch. 9 paras. 1-9, 22)