Taxation of Chargeable Gains Act 1992 Schedule 5AAA paragraph 34

Disapplication of paragraph 3A of Schedule 7AC: qualifying institutional investors

Paragraph 34 of Schedule 5AAA prevents qualifying institutional investors from benefiting twice — once under the fund exemption rules and again under the substantial shareholding exemption — by requiring their ownership to be ignored for the purposes of the Schedule 7AC exemption where that ownership runs through the same intermediate company that already gives rise to a partial exemption.

• Where a company (the investing company) realises a gain or loss and part of that gain or loss is already exempt under the fund exemption rules because of the involvement of qualifying institutional investors, a double-benefit risk arises.
• To the extent that qualifying institutional investors hold their interest in the investing company through the intermediate company (known as "Q") that triggered the partial fund exemption, that ownership must be disregarded when testing eligibility for the separate substantial shareholding exemption under Schedule 7AC.
• Qualifying institutional investors are defined by reference to Schedule 7AC and include entities such as pension schemes, sovereign wealth funds and certain widely held collective investment vehicles.
• Ownership for these purposes is traced using the same rules that apply to the substantial shareholding exemption for qualifying institutional investors, ensuring a consistent approach across both exemptions.