Income Tax (Earnings and Pensions) Act 2003 Schedule 4 paragraph 9

The "no material interest" requirement

Schedule 4 paragraph 9 prevents individuals who have, or recently had, a material interest in a close company from participating in a CSOP scheme where that company's shares (or shares in a company it controls) are available under the scheme.

• An individual cannot participate in a CSOP scheme if they currently have, or have had within the previous 12 months, a material interest in a relevant close company — meaning the company whose shares are available under the scheme, a company that controls that company, or a consortium member that owns such a controlling company.
• A material interest can arise not only through the individual's own holdings but also through the combined holdings of the individual and their associates, or through an associate's holdings alone or together with other associates.
• The detailed definitions of "material interest" and "associate" are set out in further supporting provisions — paragraphs 10 and 11 for material interest, and paragraphs 12 to 14 for associate.
• The definition of "close company" is broadened to include companies that would be close companies were it not for their non-UK residence or their status as certain types of quoted company, as set out in sections 442(a), 446 and 447 of the Corporation Tax Act 2010.