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- Consider each non-resident separately. Non-resident C has fund income of 75m.
- 20% of fund income of 225m is 45m
- The investment manager’s income, together with that of parties connected to him (non-resident C), totals 75m. (The 75m fees received by the investment manager are a cost before the fund income is calculated, rather than income, and are not taken into account for this purpose.) This exceeds the 20% limit of 45m so the exemption is not available in respect of the transactions that the investment manager carries out for non-resident C.
- The 20% rule is not broken in respect of non-residents A and B as they are not connected to the investment manager.