Section 396 | Loan to buy interest in employee-controlled company

(1)This section applies to a loan to an individual that is used in one or more of the ways specified in subsection (2).

(2)The ways are—

(a)acquiring part of the ordinary share capital of a company that first becomes an employee-controlled company—^F1

(i)after the date of acquisition, or^F1

(ii)not earlier than 12 months before that date, and^F1

(b)repaying another loan to which this section applies.

(3)For the purposes of this section and section 397, a company is employee-controlled at any time when—

(a)more than 50% of the issued ordinary share capital of the company is owned beneficially by persons who are full-time employees of the company, and

(b)more than 50% of the voting power in the company is so owned.

(4)If an individual owns beneficially more than 10% of the issued ordinary share capital of, or voting power in, a company, for the purposes of subsection (3) the excess is treated as being owned by an individual who is not a full-time employee of the company.

(5)In this section and section 397 “full-time employee”, in relation to a company, means an individual the greater part of whose time is spent working as an employee or director of the company or of a 51% subsidiary of the company.

(6)This section is subject to section 411 (ineligibility of interest where business is occupation of commercial woodlands).