Income Tax Act 2007 section 809FZM

Controlling equity stake funds

Section 809FZM defines what a controlling equity stake fund is and sets out special rules for how investments and disposals by such funds are timed when the fund holds at least a 25% interest in a trading company or the holding company of a trading group.

• A controlling equity stake fund is an investment scheme (other than a venture capital fund or significant equity stake fund) where it is reasonable to expect that over half of total invested value will be in controlling interests in trading companies or holding companies of trading groups, and over half will be held for at least 40 months.
• Where such a fund holds a 25% interest in a trading company or holding company of a trading group, any subsequent investment in that company is treated as having been made at the time the 25% interest was first acquired — effectively backdating later investments.
• Any disposal of an investment in that company is not treated as occurring until the fund makes a disposal that takes its interest below the 25% threshold — meaning interim disposals are deferred for calculation purposes.
• When testing whether a fund holds a controlling interest or any particular percentage interest in a company, share capital held by an associated investment scheme is treated as held by the controlling equity stake fund itself.