Income Tax Act 2007 section 809FZF

Unwanted short-term investments

Section 809FZF allows certain unwanted short-term investments acquired as a necessary part of a wider transaction to be disregarded when assessing an investment scheme's average holding period for carried interest purposes.

• Where a fund must acquire an unwanted investment in order to secure a desired investment, and disposes of the unwanted investment within a specified period, both the acquisition and disposal can be disregarded
• Only certain types of investment qualify: land (12-month disposal window), unlisted company securities or related direct loans (6 months), and qualifying direct loans under section 809FZR (120 days)
• The unwanted investment must be no greater in value than the desired investments, must have been necessary to complete the transaction, and any profit on its disposal must not affect carried interest calculations
• The disregard ceases to apply to future investments if 25% or more of the scheme's total capital has been, or is expected to have been, deployed in excludable unwanted short-term investments over the scheme's lifetime — this is a cumulative cap that does not reset as disposals occur