Legislation – Finance Act 2025

“(za)

that the trustees of the settlement are resident in the United Kingdom at the time of the disposal and continue to be UK resident for the remainder of the tax year in which that time falls,”.

“(za)

the trustees of the settlement cease to be resident in the United Kingdom,”.

“(3A)

See also section 80 (trustees ceasing to be resident in U.K.), which provides for similar consequences in circumstances where the trustees of the settlement cease to be resident in the United Kingdom.”

“(ba)

that the settlement meets the trustee independence requirement (see section 236LA) at the time of the disposal and continues to meet that requirement for the remainder of the tax year in which that time falls,”.

“236LATrustee independence requirement

(1)

A settlement meets the trustee independence requirement if—

(a)

less than 50% of the trustees are persons who are excluded participators, and

(b)

excluded participators do not have control of the settlement.

(2)

In this section “excluded participator” means—

(a)

a person that is an excluded participator within the meaning given by section 236J, other than a person who is an excluded participator only as a result of a connection falling within section 286(3) (trustees regarded as connected with settlors etc), or

(b)

a company not falling within paragraph (a), if 50% or more of its directors are persons falling within that paragraph.

(3)

Excluded participators have control of the settlement if one or more excluded participators, acting alone or together without the trustees who are not excluded participators, have power under the trust instrument or by law to—

(a)

dispose of, advance, lend, invest, pay or apply settlement property;

(b)

vary or terminate the settlement;

(c)

add or remove a person as a beneficiary or to or from a class of beneficiaries;

(d)

appoint or remove trustees or give another individual control over the settlement;

(e)

direct the exercise of a power mentioned in sub-paragraphs (a) to (d).”

“(ba)

the settlement ceases to meet the trustee independence requirement,”.

“(ba)

the settlement ceases to meet the trustee independence requirement,”.

“(2A)

Where—

(a)

a disqualifying event falling within subsection (2)(za) occurs (trustees cease to be resident in the United Kingdom),

(b)

the event only occurs as a result of the death of a trustee of the settlement, and

(c)

within the period of 6 months beginning with the death of the trustee, the trustees become resident in the United Kingdom,

the disqualifying event is to be ignored.

(2B)

Where—

(a)

a disqualifying event falling within subsection (2)(ba) occurs (trustee independence requirement ceases to be met),

(b)

the event only occurs as a result of—

(i)

the death of a trustee of the settlement, or

(ii)

the death of a director of a company that is a trustee of the settlement, and

(c)

within the period of 6 months beginning with that death, the settlement meets the trustee independence requirement,

the disqualifying event is to be ignored.”

“(2A)

Where—

(a)

a disqualifying event falling within subsection (2)(ba) occurs (trustee independence requirement ceases to be met),

(b)

the event only occurs as a result of—

(i)

the death of a trustee of the settlement, or

(ii)

the death of a director of a company that is a trustee of the settlement, and

(c)

within the period of 6 months beginning with that death, the settlement meets the trustee independence requirement,

the disqualifying event is to be ignored.”

“(ca)

that the trustees have taken all reasonable steps to secure that—

(i)

the consideration for the disposal does not exceed the market value of the ordinary share capital at the time of the disposal, and

(ii)

where some or all of the consideration for the disposal is deferred, that the rate of any interest payable in relation to the deferral does not exceed a reasonable commercial rate,”.

“(2A)

The participation requirement is not infringed by reason of the exclusion of directors of the company from participating in an award.”

“Employee-ownership trusts

401ZARelief: distributions to trustees of employee-ownership trusts

(1)

This section applies where—

(a)

there has been a disposal of ordinary share capital of a company (“C”) to the trustees of a settlement,

(b)

the relief requirements are met in relation to the disposal,

(c)

C has made a payment to the trustees that is a distribution to the trustees chargeable to income tax as a result of this Chapter or Chapter 4 (dividends from non-UK resident companies), and

(d)

the payment was made for the purposes of meeting the trustees’ acquisition costs.

(2)

On the making of a claim, so much of the trustees’ acquisition costs may be deducted from the distribution (whether chargeable under this Chapter or Chapter 4) as—

(a)

does not reduce the amount of the distribution below nil, and

(b)

has not been deducted from any other distribution.

(3)

The “relief requirements” means the requirements set out in section 236H(4) of TCGA 1992 (disposals to employee-ownership trusts), but those requirements have effect for the purposes of this section as if references to “P” were to the person making the disposal whether or not that person is a company.

(4)

For the purposes of this section, the trustees’ acquisition costs are sums expended by the trustees on—

(a)

the acquisition of ordinary share capital in C by the trustees that resulted from the disposal;

(b)

the repayment of any sums borrowed to fund that acquisition;

(c)

the payment of interest on any such sums or in respect of any deferral of consideration for the disposal to the extent the payment is not in respect of interest exceeding a reasonable commercial rate;

(d)

any valuation of C carried out in connection with the acquisition;

(e)

any liability to stamp duty or stamp duty reserve tax on the acquisition;

(f)

such other reasonable expenses as are directly connected with the acquisition (but this does not include any expenses incurred in connection with the ownership of the ordinary share capital once acquired).”