Commentary on Sections Overview Overview Section 823: Treatment of transactions where requirements of 20% rule not met
2434.This section provides that, if the 20% rule is not met but all the other independent investment manager conditions are met, only the income in relation to which the 20% rule is not met is not relevant disregarded income. It is based on section 127(8) of FA 1995 and paragraph 4(5) of Schedule 26 to FA 2003.
2435.So far as that section and that paragraph differ in approach, the difference is preserved by subsection (2) so that those provisions remain in line with their source provisions as they continue to apply for the purposes of section 126 of FA 1995 and section 148 of FA 2003 respectively.
2436.A reference to “transaction income”, which is defined in section 814(5), has been substituted in subsection (2)(a) for the reference to “taxable sums” in section 127(8) of FA 1995. The term “taxable sums”, as defined in section 127(3) of that Act read with sections 127(1) and 126(2)(c) of that Act, includes amounts chargeable to capital gains tax under section 10 of TCGA. But, in relation to section 127(8) of FA 1995 as it has effect for the purposes of determining whether income is excluded income within section 128(3)(d) of that Act, reference to chargeable gains is unnecessary.
2437.In subsection (2)(b), a reference to “the income of the non‑UK resident company” has been substituted for the reference in paragraph 4(5) of Schedule 26 to FA 2003 to “the chargeable profits of the non‑resident company”. See Change 121 in Annex 1.