185 Associated persons

(1) The following rules apply in determining whether a person is an associate of another person in relation to a company —

• a husband and wife living together are associated with one another and a child under the age of 18 is associated with his/her parents (no other relatives are treated as associated);
• Two civil partners living together are associated with one another and a child under the age of 18 of a civil partner is associated with those civil partners (no other relatives are treated as associated);
• a person who has control (see section 173) of a company and that company are associated;
• 2 companies which are controlled by the same person are associates;
• trustee shareholders (other than bare trustees) are associated with —
  • any person who directly or indirectly provided property to the trustees or who made reciprocal arrangements for some other person to do so;
  • the husband, wife or child of such a person;
  • any beneficiary who is or may become entitled to an interest in any shares worth more than 50 per cent of the value of the property in the trust (excluding property which that person can never have an interest);
  [In considering the effect of the association of a trustee with another person, any interest of the trustee in some other capacity (for example, as a personal interest or as trustee of another trust) is ignored.]
• where shares in a company form part of a deceased person’s estate, personal representatives of the deceased shareholder are associated with any beneficiary who is or may become entitled to an interest in the shares worth more than 5 per cent of the value of the property comprised in the deceased’s estate;
• a person who is accustomed to act on the direction of another person in relation to a company’s affairs is associated with that person in relation to that company.
  [This latter rule is not to be applied to the normal relationship between an employee and someone set over him/her in the company].

(2) The association between trustees, settlors and beneficiaries does not apply to trustees of an exempt approved pension scheme or of trusts exclusively for the benefit of employees (which can include directors) of the company concerned or of a company in the same group (that is, a company and its 51 per cent subsidiaries) and of their dependants. It is to be noted that a trust wholly or mainly for the benefit of directors or their relatives is not excluded from the “association” rules by this provision.

(3) A “material interest” is a 5 per cent interest by reference to the value of property held on trusts or comprised in an estate. If a person is excluded from benefiting from any part of the property in question then that part is ignored in this calculation.

Relevant Date: Finance Act 2021