Section 103KG: Meaning of "arise" in Chapter 5, Taxation of Chargeable Gains Act 1992

For the purposes of this Chapter, carried interest "arises" to an individual ("A") if, and only if, it arises to him or her for the purposes of Chapter 5E of Part 13 of ITA 2007.

But section 809EZDB of ITA 2007 (sums arising to connected company or unconnected person) does not apply in relation to a sum of carried interest arising to—

a company connected with A, or

a person not connected with A,

where the sum is deferred carried interest in relation to A.

Where—

section 809EZDB of ITA 2007 has been disapplied in relation to a sum of deferred carried interest by virtue of subsection (2),

the sum ceases to be deferred carried interest in relation to A, and

the sum does not in any event arise to A apart from this subsection,

the sum is to be regarded as arising to A at the time it ceases to be deferred carried interest.

But subsection (4) does not apply if—

none of the enjoyment conditions is met in relation to the sum when it ceases to be deferred carried interest, and

there is no reasonable likelihood that any of those conditions will ever be met in relation to the sum.

In determining whether any of the enjoyment conditions is met in relation to a sum or part of a sum—

regard must be had to the substantial result and effect of all the relevant circumstances, and

all benefits which may at any time accrue to a person as a result of the sum ceasing to be deferred carried interest in relation to A must be taken into account, irrespective of—

the nature or form of the benefits, or

whether the person has legal or equitable rights in respect of the benefits.

The enjoyment condition in subsection (6)(b), (c) or (d) is to be treated as not met if it would be met only by reason of A holding shares or an interest in shares in a company.

But subsections (8) and (9) do not apply if the sum referred to in subsection (2) arises to the company referred to in subsection (2)(a) or the person referred to in subsection (2)(b) as part of arrangements where—

it is reasonable to assume that in the absence of the arrangements the sum or part of the sum would have arisen to A or an individual connected with A, and

it is reasonable to assume that the arrangements have as their main purpose, or one of their main purposes, the avoidance of a liability to pay income tax, capital gains tax, inheritance tax or corporation tax.

The condition in subsection (10)(b) is to be regarded as met in a case where the sum is applied directly or indirectly as an investment in a collective investment scheme.

Subsection (2) does not apply in relation to any sum in relation to which the condition in subsection (8)(b) of section 809EZDB is met by virtue of subsection (9) of that section.

Subsection (2) also does not apply if—

it is reasonable to assume that the deferral referred to in subsection (3)(a) or (b) is not the effect of genuine commercial arrangements, or

that deferral is the effect of such arrangements but it is reasonable to assume that the arrangements have as their main purpose, or one of their main purposes, the avoidance of a liability to pay income tax, capital gains tax, corporation tax or inheritance tax.

In subsection (13), "genuine commercial arrangements" means arrangements involving A (alone or jointly with others performing investment management services) and external investors in the investment scheme.

Section 993 of ITA 2007 (meaning of "connected") applies for the purposes of this section but as if—

subsection (4) of that section were omitted, and

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

Section 103KG: Meaning of "arise" in Chapter 5

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