Revenue Note for Guidance

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Revenue Note for Guidance

433 Meaning of “participator”, “associate”, “director” and “loan creditor”


This section defines the terms “participator”, “associate”, “director” and “loan creditor” as used in Part 13.


(1) A “participator” is a person having a share or interest in the capital or income of a company. This definition is enlarged on to include —

  • persons holding present or future rights to share capital, voting rights, loan capital (except in respect of an ordinary bank loan),
  • persons holding rights to share in any distribution by the company,
  • persons holding rights to share in any premium on redemption of loan capital, and
  • persons holding any other rights under which the person could secure that present or future income or assets of the company could be applied directly or indirectly for the person’s benefit.

(2) The definition of “participator” is without prejudice to any other provision in Part 13 which requires that a participator in one company be treated as being also a participator in another company. This is required for —

  • section 436(2) which provides that a participator in a company which controls another company is also to be treated as a participator in that other company so that expense incurred by that other company in providing certain benefits for that person will be treated as a distribution,
  • section 438(7) the effect of which is that the special charge to income tax on a close company which makes a loan to a participator will apply equally where the loan is made to a participator in a company which controls the company making the loan, and
  • section 439 which provides that the grossed-up amount of such a loan, when it is written off, will be treated as income of the borrower for the purpose of higher-rate tax: by virtue of section 438(7). This applies whether the borrower is a participator in the company making the loan or a participator in another company which controls that company.

(3) An “associate”, in relation to any person whether a participator or not, is the person’s close relatives, the person’s partners, the trustees of any settlement made by the person or by any close relative and, if the person is interested in any shares or obligations of the company as a beneficiary of a trust or of a deceased person’s estate, any other person interested in those shares or obligations. Excluded is a person entitled to benefit under a trust established for superannuation and allied purposes.

(4) The term “director” includes any person in accordance with whose directions or instructions the directors are accustomed to act and any manager who alone or with associates owns or controls 20 per cent or more of the ordinary share capital of the company.

(5) Shares or voting power possessed by a person’s associates can be attributed to the person even if that person is not a participator. The expression “either on his or her own or with his or her relatives” has a corresponding meaning.

(6) The term “loan creditor” includes any person holding redeemable loan capital issued by the company and any person to whom the company is indebted for money borrowed or capital assets acquired. It also includes any person who is entitled to a debt from the company in return for a right to receive income and any person who has received or will receive substantially more from the company that the value of the consideration the person has given the company. Excluded is a bank which is a loan creditor of a company in respect of a loan given by the bank in the ordinary course of its business.

(7) The definition of “loan creditor” is extended to include, to the extent of the person’s interest, a person who has a beneficial interest in the debt or loan capital in question even though the person may not be the creditor.

Relevant Date: Finance Act 2021