Section 464 | Meaning of “25% investment”

(1)A person (“P”) has a 25% investment in another person (“C”) if—

(a)P possesses or is entitled to acquire 25% or more of the voting power in C,

(b)in the event of a disposal of the whole of the equity in C, P would receive 25% or more of the proceeds,

(c)in the event that the income in respect of the equity in C were distributed among the equity holders in C, P would receive 25% or more of the amount so distributed, or

(d)in the event of a winding-up of C or in any other circumstances, P would receive 25% or more of C's assets which would then be available for distribution among the equity holders in C in respect of the equity in C.

(2)In this section references to the equity in C are to—

(a)the shares in C other than restricted preference shares, or

(b)loans to C other than normal commercial loans.

(3)For this purpose “shares in C” includes—

(a)stock, and

(b)any other interests of members in C.

(4)For the purposes of this section a person is an equity holder in C if the person possesses any of the equity in C.

(5)For the purposes of this section—

“normal commercial loan” means a loan which is a normal commercial loan for the purposes of section 158(1)(b) or 159(4)(b) of CTA 2010, and

“restricted preference shares” means shares which are restricted preference shares for the purposes of section 160 of CTA 2010.

(6)In applying for the purposes of this section the definitions of “normal commercial loan” and “restricted preference shares” in a case where—

(a)C is not a company, or

(b)C is a company which does not have share capital,

sections 160(2) to (7) and 161 to 164 of CTA 2010 (and any other relevant provisions of that Act) have effect with the necessary modifications.

(7)In this section references to a person receiving any proceeds, amount or assets include—

(a)the direct or indirect receipt of the proceeds, amount or assets, and

(b)the direct or indirect application of the proceeds, amount or assets for the person's benefit,

and it does not matter whether the receipt or application is at the time of the disposal, distribution, winding-up or other circumstances or at a later time.

(8)If—

(a)there is a direct receipt or direct application of any proceeds, amount or assets by or for the benefit of a person (“A”), and

(b)another person (“B”) directly or indirectly owns a percentage of the equity in A,

there is, for the purposes of subsection (7), an indirect receipt or indirect application of that percentage of the proceeds, amount or assets by or for the benefit of B.

(9)For this purpose the percentage of the equity in A directly or indirectly owned by B is to be determined by applying the rules in sections 1155 to 1157 of CTA 2010 with such modifications (if any) as may be necessary.

(10)Subsection (7) is not to result in a person being regarded as having a 25% investment in another person merely as a result of their being parties to a normal commercial loan.

(11)Any reference in this section, in the case of a person who is a member of a partnership, to the proceeds, amount or assets of the person includes the person's share of the proceeds, amount or assets of the partnership (apportioning those things between the partners on a just and reasonable basis).