Commentary on Sections Overview Overview Section 819: Investment managers: the 20% rule
2418.This section sets out the “20% rule” for investment managers. It is based on section 127(4) of FA 1995 and paragraph 4(1) of Schedule 26 to FA 2003 which are substantively the same.
2419.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.