Section 809EZB | Meaning of “management fee” in section 809EZA

(1)Subject as follows, for the purposes of section 809EZA “management fee” means any sum (including a sum in the form of a loan or advance or an allocation of profits) except so far as the sum constitutes—

(a)a repayment (in whole or part) of an investment made directly or indirectly by the individual , or a person who is connected with the individual, in the scheme,

(b)an arm's length return on an investment made directly or indirectly by the individual , or a person who is connected with the individual, in the scheme, ...

(c)carried interest within the definition “section” 23I of ITTOIA 2005 arising to the individual for the purposes of that section, or,

(d)a sum that would fall within paragraph (c) had it not been deferred as specified in paragraph 9(2)(a) or (b) of Schedule A1 to ITTOIA 2005.

(2)For the purposes of subsection (1)(b) a return on an investment is “an arm's length return” if (and only if)—

(a)the return is on an investment which is of the same kind as investments in the scheme made by external investors,

(b)the return on the investment is reasonably comparable to the return to external investors on those investments, and

(c)the terms governing the return on the investment are reasonably comparable to the terms governing the return to external investors on those investments.

(2A)For the purposes of subsection (2)(b), the return on the investment is reasonably comparable to the return to external investors on the investments referred to in subsection (2)(a) if (and only if)—

(a)the rate of return on the investment is reasonably comparable to the rate of return to external investors on those investments, and

(b)any other factors relevant to determining the size of the return on the investment are reasonably comparable to the factors determining the size of the return to external investors on those investments.

(3)In this Chapter “sum” includes any money or money's worth (and other expressions are to be construed accordingly).

(4)Where—

(a)a sum in the form of money's worth arises to the individual from the scheme in the ordinary course of the scheme's business, and

(b)the individual gives the scheme money in exchange for the sum,

the sum constitutes a “management fee” only to the extent that its market value at the time it arises exceeds the amount of the money given by the individual.

(5)Section 993 (meaning of “connected”) applies for the purposes of this section, but as if—

(a)subsection (4) of that section were omitted, and

(b)partners in a partnership in which the individual is also a partner were not “associates” of the individual for the purposes of sections 450 and 451 of CTA 2010 (“control”).