Section 541C of the Principal Act is amended -

(a) by substituting the following for subsection (1):

"(1) In this section -

'carried interest', in relation to a qualifying venture capital fund, means the share of profits (where the share ratio was agreed at the commencement of the qualifying venture capital fund) referred to in paragraph (b) of the definition of 'total profits' that are received by a company, partnership or individual in respect of the management of the qualifying venture capital fund;

'carried interest to which this section applies', in relation to a qualifying venture capital fund, means an amount of carried interest which is not greater than 20 per cent of the total profits of a qualifying venture capital fund and which is a proportion of carried interest derived from the relevant investment;

'EEA Agreement' means the Agreement on the European Economic Area signed in Oporto on 2 May 1992, as adjusted by all subsequent amendments to that Agreement;

'EEA State' means a state which is a contracting party to the EEA Agreement;

'innovation activities' means development of new technological, telecommunication, scientific or business processes;

'investor', in relation to a relevant investment, means a person other than a person entitled to carried interest or a person connected with that person;

'proportion of carried interest derived from the relevant investment' means an amount of carried interest determined by the formula -