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HMRC internal manual

International Manual

Non-residents trading in the UK: through UK investment managers, brokers or Lloyd’s agents: The independence test: meaning of "substantial part"

What does “substantial part” mean?

The provision of services to the non-resident and persons connected with the non-resident is not a ‘substantial part’ of the investment management business where it does not exceed 70% of that business, either by reference to fees or to some other measure where that would be more appropriate.

Where investment management services are provided to a collective investment scheme constituted as a partnership, participants in the scheme are not regarded as connected persons for this purpose solely by reason of membership of the partnership. There is an 18 month period of grace for a new investment management business to meet this 70% test. Where services to the non-resident represent more than 70% of the investment manager’s business 18 months after the start of a new investment management business, but that was for reasons outside the manager’s control and the manager has taken all reasonable steps to remedy the position, the test can still be met.