Taxation of Chargeable Gains Act 1992

[F1 236N Limited participation requirement U.K.

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

(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—

(a) P was a participator in C, and

(b) the participator fraction exceeded 2/5.

(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.

(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—

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

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

(5) “The participator fraction” means—

where—

• NP is the sum of—

  (a)

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

  (i)

  participators in C, and

  (ii)

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

  (b)

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

  (i)

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

  (ii)

  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—

(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

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

(7) In this section—

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

(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.]

Textual Amendments

F1 Ss. 236H-236U and cross-heading inserted (with effect in accordance with Sch. 37 para. 2 of the amending Act) by Finance Act 2014 (c. 26), Sch. 37 para. 1 (with Sch. 37 paras. 3, 4)