Income Tax Act 2007 section 257LF

Restrictions on being an employee, partner or paid director

Section 257LF sets out the restrictions preventing an investor (and their associates) from qualifying for Social Investment Tax Relief if they hold certain roles in the social enterprise, its subsidiaries, partners, or linked companies during the longer applicable period.

• Neither the investor nor any associate may be an employee, partner, trustee, or paid director of the social enterprise, its subsidiaries, its partners, or linked companies at any time during the longer applicable period
• A director is treated as "remunerated" if they or a partnership they belong to receive or are entitled to receive a payment from a related person during that period, though certain routine commercial payments are excluded
• Excluded payments include genuine expense reimbursements, arm's length interest, normal-return dividends, market-value goods payments, commercial rent, reasonable fees for specialist professional services, and — where specific conditions are met — reasonable directors' remuneration
• To benefit from the directors' remuneration exclusion, the investor must have made a qualifying investment at a time when they had never been involved in carrying on the enterprise's trade, and any subsequent investment must fall within three years of the last investment meeting that condition