Section 236N | Limited participation requirement ^F1

From legislation.gov.uk

(1)The limited participation requirement is met if Conditions A and B are met.^F1

(2)Condition A is that there was no time in the period of 12 months ending immediately after the disposal mentioned in section 236H(1) when—^F1

(a)P was a participator in C, and^F1

(b)the participator fraction exceeded 2/5.^F1

(3)Condition B is that the participator fraction does not exceed 2/5 at any time in the period beginning with that disposal and ending at the end of the tax year in which it occurs.^F1

(4)But a time which falls in a period during which the participator fraction exceeded 2/5 is to be disregarded for the purposes of subsection (2)(b) and (3) if—^F1

(a)that period lasts no more than 6 months, and^F1

(b)the fraction exceeded 2/5 during that period by reason of events outside the reasonable control of the trustees.^F1

(5)“The participator fraction” means—^F1

Formula

\frac{NP}{NE}

where—

NP is the sum of—

the number of persons who at the time in question are both—

participators in C, and

employees of, or office-holders in, C, and

the number of other persons who at that time are both—

employees of, or office-holders in, C or, if C is the principal company of a trading group, any member of the group, and

connected with persons within paragraph (a);

NE is the number of persons who at that time are employees of C or, if C is the principal company of a trading group, any member of the group.

(6)The participators in C who are referred to in subsections (2) and (5) do not include any participator who—^F1

(a)is not beneficially entitled to, or to rights entitling the participator to acquire, 5% or more of, or of any class of the shares comprised in, C’s share capital, and^F1

(b)on a winding-up of C would not be entitled to 5% or more of its assets.^F1

(7)In this section—^F1

(a)“participator” has the meaning given by section 454 of CTA 2010, and^F1

(b)references to a participator in a company are, in the case of a company which is not a close company (within the meaning of Chapter 2 of Part 10 of that Act), to be construed as references to a person who would be a participator in the company if it were a close company.^F1