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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 20% rule: consequences of not meeting the rule

INTM269065 explains the consequences of a failure to meet the conditions at INTM269060. In general, the result of such a failure is that the affected transactions are outside the scope of the Investment Manager Exemption (IME) and the resulting income is fully exposed to income tax or corporation tax. However, this outcome is moderated where the only failure is to meet the requirements of the 20% rule.

Where the investment manager carries out ‘investment transactions’ in relation to which the requirements of the 20% rule are not met, but all of the other conditions are satisfied, the potential liability to income tax or corporation tax is limited. In these circumstances, it is only that part of the income from the transactions to which the investment manager and persons connected with the investment manager are beneficially entitled that is subject to income tax or corporation tax.