Revenue Note for Guidance

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Revenue Note for Guidance

186 Connected persons

Summary

This section sets out the circumstances in which a person is to be treated as connected with a company for the purposes of this Chapter. In general, a person is connected with a company if that person has more than a 30 per cent interest in the capital, the voting power or the assets of the company. In determining whether a person is connected with a company, the person is treated as having all the rights and powers of that persons associates. In addition, a person is treated as entitled to acquire anything which that person is entitled to acquire at a future date or will at a future date be entitled to acquire.

Details

(1) A person is connected with a company where any of the following conditions are satisfied as regards that person’s own rights and interests or the combined rights and interests of that person and the associates of that person —

  • the person, directly or indirectly, owns or is entitled to acquire more than 30 per cent of —
    • the company’s issued ordinary share capital,
    • the total of the company’s issued share capital and loan capital, or
    • the voting power in the company.
  • the person, directly or indirectly owns or is entitled to acquire the right to receive more than 30 per cent of the assets of the company available for distribution to equity holders on a winding up or otherwise. [“equity holder” and “assets available for distribution” have the same meaning as they have for the purposes of Chapter 5 of Part 12 – group relief].
  • the person has control of the company (that is, the person has the power to secure that the company’s affairs are conducted in accordance with that person’s wishes) either through the holding of shares or voting rights or by virtue of provisions in the company’s articles of association.

(2) In determining whether a person has a 30 per cent interest in the total of a company’s issued share capital and loan capital, the person’s interest in the loan capital of the company is ignored if the loan was acquired by that person in the ordinary course of a business which includes the lending of money. This applies provided the person takes no part in the management or conduct of the company.

(3) References to the loan capital of a company are references to any debt incurred by the company for —

  • money borrowed or capital assets acquired by it,
  • any right to receive income created in the company’s favour, or
  • consideration which at the time the debt was incurred was substantially less than the amount of the debt (including any premium).

(4) A person is entitled to acquire anything which —

  • that person is entitled to acquire at a future date, or
  • that person will at a future date be entitled to acquire.

A person is treated as having the rights and powers of that person’s associates in addition to that person’s own rights and powers.

Relevant Date: Finance Act 2018