Income Tax Act 2007 section 809EZDA

Sums arising to connected persons other than companies

Section 809EZDA prevents avoidance of the disguised investment management fees rules by routing sums through connected individuals rather than receiving them directly.

• Where a sum arises to a non-corporate person (B) who is connected with an individual (A), and neither income tax under the disguised fee rules nor capital gains tax under the relevant TCGA provisions is charged on B, the sum is treated as arising to A instead
• The sum is treated as arising to A at the same time it actually arises to B, so no timing advantage can be gained through the arrangement
• The standard connected persons definition applies, but with modifications: the partnership exclusion in section 993(4) is disapplied, and fellow partners in a partnership with A are not treated as associates for control purposes
• These rules took effect for sums arising on or after 22 October 2015, with limited transitional protection for carried interest connected to disposals of partnership assets before that date