Income Tax Act 2007

[F1 257LF Restrictions on being an employee, partner or paid director U.K.

(1) This section applies—

(a) to the investor, and

(b) to any individual who is an associate of the investor.

(2) An individual to whom this section applies must not at any time in the longer applicable period be—

(a) an employee of—

(i) the social enterprise,

(ii) any subsidiary of the social enterprise,

(iii) a partner of the social enterprise, or

(iv) a partner of any subsidiary of the social enterprise,

(b) a partner of—

(i) the social enterprise, or

(ii) any subsidiary of the social enterprise,

(c) a trustee of—

(i) the social enterprise, or

(ii) any subsidiary of the social enterprise, or

(d) a remunerated director of—

(i) the social enterprise, or

(ii) a linked company.

(3) In this section—

• “linked company” means—

  (a)

  a subsidiary of the social enterprise,

  (b)

  a company which is a partner of the social enterprise, or

  (c)

  a company which is a partner of a subsidiary of the social enterprise;

• “related person” means—

  (a)

  the social enterprise,

  (b)

  a person connected with the social enterprise,

  (c)

  a linked company of which the individual is a director, or

  (d)

  a person connected with such a company;

• “subsidiary”, in relation to the social enterprise, means a company which at any time in the longer applicable period is a 51% subsidiary of the social enterprise (and such a company is therefore a subsidiary of the social enterprise for the purposes of this section even at times when it is not a 51% subsidiary of the social enterprise).

(4) For the purposes of subsection (2)(d), an individual who is a director of the social enterprise or a linked company is “remunerated” if the individual (or a partnership of which the individual is a member)—

(a) receives at any time in the longer applicable period a payment from a related person, or

(b) is entitled to receive a payment from a related person in respect of any time in the longer applicable period.

(5) For the purposes of subsection (4) the following are ignored—

(a) any payment or reimbursement of travelling or other expenses wholly, exclusively and necessarily incurred by the individual in the performance of the individual's duties as a director,

(b) any interest which represents no more than a reasonable commercial return on money lent to a related person,

(c) any dividend or other distribution which does not exceed a normal return on the investment,

(d) any payment for the supply of goods which does not exceed their market value,

(e) any payment of rent for any property occupied by a related person which does not exceed a reasonable and commercial rent for the property,

(f) any necessary and reasonable remuneration which—

(i) is paid for services, rendered to a related person in the course of a trade or profession, that are not secretarial services and are not managerial services and are not services of a kind provided by the person to whom they are rendered, and

(ii) is taken into account in calculating for tax purposes the profits of that trade or profession, and

(g) if condition A is met and (where applicable) condition B is also met, any other reasonable remuneration (including any benefit or facility) received by the individual, or to which the individual is entitled, for services rendered by the individual—

(i) to the company (whether the social enterprise or a linked company) of which the individual is a director, and

(ii) in the individual's capacity as a director of that company.

(6) Condition A is that the investor made the investment, or previously made another investment meeting the requirement in section 257L(1), at a time (“the qualifying time”) when—

(a) the requirements of this section and sections 257LG and 257LH (even if the three sections were not then in force) would have been met even if each other reference in the three sections to any time in the longer applicable period were a reference to any time before the qualifying time, and

(b) the investor had never been involved in carrying on (whether on the investor's own account or as a partner, director or employee) the whole or any part of the trade, business or profession carried on by the social enterprise or a subsidiary of the social enterprise.

(7) Condition B is that—

(a) the investment did not meet condition A (but a previous investment did), and

(b) the investment was made before the third anniversary of the date when the investor last made an investment in the social enterprise which met condition A.

(8) References in this section to an individual in the individual's capacity as a director of a company include, if the individual is both a director and an employee of the company, references to the individual in the individual's capacity as an employee of the company but, apart from that, an individual who is both a director and an employee of a company is treated for the purposes of this section as a director, and not an employee, of the company.

(9) In subsections (2), (4) and (5) “director” does not include a trustee of a charity that is a trust.]

Textual Amendments

F1 Pt. 5B inserted (17.7.2014) by Finance Act 2014 (c. 26), Sch. 11 para. 1