Income Tax Act 2007 section 835N

Investment managers: the 20% rule

Section 835N sets out the "20% rule" that must be satisfied for an investment manager acting on behalf of a non-UK resident to benefit from the disregarded income provisions.

• The investment manager and connected persons must intend that their combined beneficial entitlement to the non-UK resident's relevant disregarded income does not exceed 20% of that income during a qualifying period.
• If that intention is not fulfilled, the rule can still be met provided the failure is attributable to matters outside the control of the investment manager and connected persons.
• The failure must not result from the investment manager or connected persons neglecting to take reasonable steps to mitigate the effect of those uncontrollable matters.
• Both conditions — the intention requirement (Condition A) and the safeguard for uncontrollable failures (Condition B) — must be satisfied for the 20% rule to be met.