SolvedINTM269120 | Non-residents trading in the UK: through UK investment managers, brokers or Lloyd’s agents: the 20% rule: qualifying period of no more than 5 years: example
From HM Revenue & Customs · International Manual
This page is for chargeable periods beginning before 1 January 2026. For chargeable periods beginning on or after 1 January 2026 the 20% test has been removed from the legislation. Where the ‘qualifying period’ includes chargeable periods beginning on or after 1 January 2026, it will no longer be a requirement for investment managers to have met the test during those periods, though for earlier periods they may still need to demonstrate that they had intended to do so.
| Years | 1 | 2 | 3 | 4 | 5 |
|---|---|---|---|---|---|
| Taxable income of non-resident | 100 | 200 | 200 | 250 | 250 |
| Entitlement of manager to above | 32 | 58 | 40 | 35 | 5 |
| Expressed as percentage of each year | 32% | 29% | 20% | 14% | 2% |
| Average cumulative percentage over qualifying period | 32% | 30% | 26% | 22% | 17% |
It may be assumed that the test is satisfied for year 1 because (a) in this example it was the manager’s intention to have a beneficial entitlement to an average of 20% or less in aggregate over a five year period and (b) that intention was fulfilled. Had the 20% beneficial entitlement been achieved before the five years were complete, then that shorter period would have been the qualifying period. A second qualifying period of up to five years could include years 2, 3, 4, 5 and 6 and so on.
Qualifying period includes years beginning on or after 1 January 2026
Where the ‘qualifying period’ includes chargeable periods beginning on or after 1 January 2026, it will no longer be a requirement for investment managers to have met the test during those periods, though for earlier periods they may still need to demonstrate that they had intended to do so. For example, in the table above if Yr 4 was a chargeable period beginning on or after 1 January 2026 the first 3 years would still satisfy the test and no further years will need to be considered.