Corporation Tax Act 2010 section 1149

Application of 20% rule to collective investment schemes

Section 1149 explains how the 20% rule is applied when a non-UK resident company participates in a collective investment scheme, by treating the scheme as if it were a hypothetical non-UK resident company.

• When a non-UK resident company earns income through a collective investment scheme, the 20% rule is tested at the level of the scheme itself, not the individual participant
• The scheme is treated as if all its transactions were carried out on behalf of a hypothetical non-UK resident company (the "assumed company"), with participants treated as if they were shareholders in that company
• If the assumed company would not be regarded as trading in the UK for tax purposes, the 20% rule is automatically treated as satisfied for the scheme's transactions
• If the assumed company would be regarded as trading in the UK, the standard 20% rule in sections 1147 and 1148 applies, but with references adjusted so that the assumed company and its taxable profits from the investment manager's transactions are used instead of the actual non-UK resident company's figures

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