Corporation Tax Act 2010 section 1147

Investment managers: the 20% rule

Section 1147 sets out the "20% rule" that limits the beneficial entitlement an investment manager (and persons connected with them) may have in a non-UK resident company's relevant disregarded income.

• The investment manager and connected persons must intend that at least 80% of the non-UK resident company's relevant disregarded income does not beneficially belong to any of them — meaning their own entitlement must not exceed 20%.
• If the 80% threshold is not achieved, the rule is still satisfied provided the shortfall is caused by matters genuinely outside the control of the investment manager and connected persons.
• Even where external factors cause a shortfall, the investment manager and connected persons must have taken all reasonable steps to mitigate the effect of those factors.
• Both conditions — the intention condition (Condition A) and the reasonable-excuse condition (Condition B) — must be met for the 20% rule to be satisfied.