Taxation of Chargeable Gains Act 1992 section 236T

Further provision about significant and controlling interests

Section 236T sets out supplementary rules for determining whether trustees of an employee benefit trust hold a significant or controlling interest in a company for the purposes of the employee ownership trust relief provisions.

• The rules in the Corporation Tax Act 2010 on equity holders and profit/asset distribution are used to identify shareholdings and entitlements when assessing the trustees' interest in the company.
• Trustees are treated as entitled to dividends on their shares even if the trust deed requires or permits them to waive those dividends — so a dividend waiver does not undermine their qualifying interest.
• Where trustees have used their shares as security for borrowing from a genuine third-party lender, any rights the lender would acquire on default are ignored when testing whether the trustees hold a controlling or significant interest — but if the trustees actually lose control of the shares, the requirement ceases to be met.
• A "third party" for these purposes excludes the company itself, members of its group, anyone who is or was a participator in the company or group within the preceding 12 months, and persons connected with such a participator.