Income Tax Act 2007 section 277

The 15% holding limit condition

Section 277 restricts when the 15% holding limit condition is tested for an investment trust's investments, and provides supplementary rules for group holdings and schemes of reconstruction.

• The 15% holding limit condition, once satisfied when a holding is acquired or added to, is treated as continuing to be met until the next addition to that holding — this prevents a breach caused solely by market fluctuations in investment values.
• An addition to a holding occurs when further shares or securities are acquired for consideration, but not when shares or securities are allotted for no consideration (such as a bonus issue).
• Holdings in companies that are members of the same group (a parent and its 51% subsidiaries) are aggregated and treated as a holding in a single company, and intra-group debts are treated as securities for this purpose.
• Where shares or securities are issued under a scheme of reconstruction proportionally to existing shareholders for no consideration, the old and new holdings are regarded as the same holding, so no new test of the 15% limit is triggered.