Overview Part 1: New Chapters 2B and 2C of Part 14 of ITA 2007 Section 835N: Investment managers: the 20% rule
1216.This section sets out the “20% rule” for investment managers. It is based on section 127(4) of FA 1995.
1217.The 20% rule has two requirements. The first requirement is that the investment manager and connected persons must intend that any interest that they may have in the non-UK resident’s “relevant disregarded income” will not exceed 20% of that income. The second requirement applies if that intention is not fulfilled. The 20% rule will continue to be met if the only reason why it is not fulfilled is because of matters outside the control of the investment manager or connected persons despite their having taken reasonable steps to mitigate the effect of those matters.
1218.In subsection (2) the term “relevant disregarded income” has been substituted for the term “relevant excluded income” which appears in section 127(4) of FA 1995. The same substitution was made in section 819(2) of ITA which is also based on section 127(4) of FA 1995.