Finance Act 2002

Part 4 General conditions

No control of CDFI by investor

14 (1) The investor must not control the CDFI at any time during the five year period.

(2) In this paragraph references to the investor include any person connected with the investor.

(3) Where the CDFI is a body corporate, the question whether the investor controls the CDFI shall, for the purposes of this paragraph, be determined in accordance with section 840 of the Taxes Act 1988.

This is subject to sub-paragraph (6).

(4) In any other case, the investor shall be treated, for those purposes, as having control of the CDFI if he has power to secure—

(a) by means of the possession of voting power in the CDFI, or

(b) by virtue of any powers conferred by the constitution of, or any other document regulating, the CDFI,

that the affairs of the body are conducted in accordance with his wishes.

This is subject to sub-paragraphs (5) and (6).

(5) Where the CDFI is a partnership and the investor is a member of that partnership, for the purposes of determining in accordance with this paragraph whether the investor controls the CDFI the other members of that partnership shall not, by virtue of their membership of the CDFI, be treated as partners of the investor.

(6) In determining whether the investor controls the CDFI there shall be attributed to the investor (to the extent that it would not otherwise be the case)—

(a) any rights or powers that the investor is entitled to acquire at a future date or will, at a future date, become entitled to acquire, and

(b) any rights or powers which another person holds on behalf of the investor or may be required to exercise, by direction, on his behalf.

Beneficial ownership

15 (1) The investor must be the sole beneficial owner of the investment when it is made.

(2) Where the investment consists of a loan, the person beneficially entitled to repayment of the loan shall be treated as the beneficial owner of the loan for the purposes of this Schedule.

Investor must not be accredited

16 The investor must not be accredited as a community development finance institution under this Schedule (see Part 2) on the investment date.

No acquisition of share in partnership

17 (1) Where the CDFI is a partnership, the investment must not consist of or include any amount of capital contributed by the investor on becoming a member of the partnership.

(2) For this purpose, the amount of capital contributed by the investor on becoming a member of the partnership includes any amount which—

(a) purports to be provided by the investor by way of loan capital, and

(b) is accounted for as partners' capital in the accounts of the partnership.

No tax avoidance purpose

18 The investment must not be made as part of a scheme or arrangement the main purpose of which, or one of the main purposes of which, is the avoidance of tax.