Corporation Tax Act 2010 section 357LG

Application of the 20% rule to collective investment schemes

Section 357LG sets out how the 20% rule (used to determine whether an investment manager's transactions give rise to Northern Ireland rate trading profits) applies where a company receives amounts as a participant in a collective investment scheme.

• The section requires you to assume that all scheme transactions are carried out on behalf of a fictitious non-UK resident company (the "assumed company") set up for the purposes of the scheme, and that participants only have shareholder-type rights in that assumed company.
• If, under these assumptions, the assumed company would not be regarded as carrying on a trade in the UK, the 20% rule is automatically treated as satisfied for transactions carried out for the purposes of the scheme.
• If the assumed company would be regarded as trading in the UK, the detailed 20% rule provisions in sections 357LE and 357LF apply as though the assumed company were the actual company, with appropriate adjustments to the calculation of relevant disregarded income.
• "Collective investment scheme" and "participant" take their meanings from section 235 of the Financial Services and Markets Act 2000.