Income Tax Act 2007 section 809FZZ

Interpretation of Chapter 5F

Section 809FZZ provides the definitions and interpretation rules for the key terms used throughout Chapter 5F, which deals with income-based carried interest. These definitions apply to all sums of carried interest arising on or after 6 April 2016.

• The section defines percentage interests (5%, 15%, 20%, 25% and 40%) in a company by reference to share capital, voting rights, distributable profits and assets on winding up, all of which must meet or exceed the relevant threshold.
• A "controlling interest" requires more than 50% of ordinary share capital together with more than 50% of voting rights, distributable profits and assets available on winding up; share capital held by a company controlled by the investment scheme counts towards this.
• Investment schemes are "connected" where one directly or indirectly controls the other, or the same person controls both; "control" is defined differently for companies, partnerships and other entities.
• Many terms — including "carried interest", "collective investment scheme", "investment scheme", "external investor" and "arrangements" — take their meanings from the existing Chapter 5E disguised investment management fees rules, while others such as "derivative contract" and "loan relationship" adapt Corporation Tax Act 2009 definitions so they apply to investment schemes rather than companies.