Taxation of Chargeable Gains Act 1992 Schedule 7ZA paragraphs 15–20

Profits and assets test

Section 15–20 of Schedule 7ZA sets out the "profits and assets test" that a person (P) must satisfy in relation to a partnership, requiring P's combined direct and indirect interests in the partnership to total at least 5% throughout the relevant period.

• P passes the test if, throughout the relevant period, the sum of P's direct interest in partnership assets, indirect interest through direct interest companies, and indirect interest through direct interest companies combined with relevant corporate partners totals at least 5%.
• P's indirect share through a direct interest company is calculated as R × V × 100, where R is P's fraction of the company's ordinary share capital and V is the lower of the company's fractional interest in the partnership's profits or assets.
• Where a relevant corporate partner also sits between P and the partnership, the formula becomes R × V × W × 100, with W representing the direct interest company's ownership fraction of the corporate partner's ordinary share capital.
• For indirect ownership calculations, if a direct interest company (or a fellow group member) directly owns more than 50% of another company's ordinary share capital, it is treated as owning 100% of that share capital.