Reliefs: employee-ownership trusts: conditions: the 'controlling interest requirement'
TCGA92/S236H(4)(c) and FA14/Sch 37, Para 3(a)
This requires that the settlement does not meet the ‘controlling interest requirement’, see CG67850, immediately before the beginning of the tax year in which the disposal occurs, but
- it meets the requirement at the end of that tax year, and
- if it met the requirement at an earlier time in that tax year it continued to meet it throughout the remainder of that tax year.
This ensures that relief may be due to a claimant even if the trust did not hold a ‘controlling interest’ at the time of the claimant’s disposal, or acquire a ‘controlling interest’ as the result of that disposal alone.
The Betelgeuse Widgets Limited EOT was set up on 26 March 2015. It began to acquire shares in Betelgeuse Widgets Limited on 7 April 2015 and first met the ‘controlling interest requirement’ on 20 May 2015. The EOT continued to meet the requirement at all times until the end of the tax year. The relief available to the previous owners of the shares is not affected by whether they transferred their shares to the EOT before or after it first met the ‘controlling interest requirement’.
The Caph Widgets Limited EOT was set up on 11 March 2015. On 16 March 2015 it acquired shares in Caph Widgets Limited that allowed it to meet the ‘controlling interest requirement’ from that date. The EOT sold a substantial number of the shares on 1 April 2015, as a result of which it ceased to meet the requirement. On 2 April 2015 the EOT acquired further shares in Caph Widgets Limited, which meant that it met the ‘controlling interest requirement’ at the end of the tax year. The EOT, having met the requirement at 5 April 2015 and at an earlier time in the tax year but not having done so throughout the intervening period, does not meet this relief requirement. Relief is not available to the previous owners of the shares acquired by the EOT on 16 March and 2 April 2015.
Where the transitional rules apply, see CG67880, the settlement does not need to fulfil the condition in the second bullet point above.