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HMRC internal manual

Capital Gains Manual

Reliefs: employee-ownership trusts: conditions: the 'all-employee benefit requirement': cases in which the requirement is treated as met: 'significant interest' condition

TCGA92/S236L(1)(b)(ii) and (2)

The trustees held a ‘significant interest’ in the company on 10 December 2013 if all the following conditions applied on that date.

  • They held 10% or more of the ordinary share capital of C and had powers of voting on all questions affecting C which, if exercised, would have yielded 10% or more of the votes capable of being exercised on such questions.
  • They were entitled to 10% or more of the profits available for distribution to the equity holders of C.
  • They would have been entitled on a winding-up of C to 10% or more of the assets available for distribution to its equity holders.
  • There were no provisions in any agreement or instrument affecting the constitution or management of C, or its shares or securities, whereby the first to third conditions above could cease to be satisfied without the trustees’ consent.

Example 20

The trustees of the Sulaphat Widgets Limited Employee Trust own 20% of the ordinary share capital of Sulaphat Widgets Limited, which entitles them to 20% of the voting rights in matters affecting the company, to 20% of its profits available for distribution and to 20% of any assets in a winding up.  There is an agreement in place, dated 19 February 2011, under which in certain circumstances the trustees are not permitted to vote on matters affecting the company.  The existence of this agreement means that the trustees did not hold a ‘significant interest’ in Sulaphat Widgets Limited on 10 December 2013.

For more information on the circumstances in which trustees hold a ‘significant interest’, see CG67875.