Appendix 19: connected persons - rules and definitions for taxation purposes

The Valuation Office Agency's (VOA) technical manual used to assess Capital Gains and other taxes.

The rules governing whether persons are “connected” are to be found in:

s.839 Income and Corporation Taxes Act 1988

s.286 Taxation of Chargeable Gains Tax Act 1992

s.270 Inheritance Tax Act 1984

1) Individuals are connected with their:

spouse )

brother and sister )

ancestors )

lineal descendants ) and their spouses

spouse’s brother and sister )

spouse’s ancestors )

spouses lineal descendants )

2) For Inheritance Tax only, the above (para 1) is extended to include the individual’s:

uncle/aunt )

nephew/niece ) and their spouse

spouse’s uncle/aunt )

spouse’s nephew and niece)

3) A trustee of a settlement is, in that capacity, connected with:

a. the settler;

b. anyone who is connected with the settler and falls into the category listed in (1);

c. any (resident or non-resident) close company if the trustee is participator therein.

4) For Inheritance Tax only the above (para 3) is extended to include:

Anyone who is connected with the settler as in (2) above.

5) Except in relation to acquisitions and disposals of partnership assets pursuant to bona fida commercial arrangements an individual who is a partner is connected with:

  • his/her partner;
  • Any person connected with his/her partner within (1) above.

6) For Inheritance Tax only the above (5) is extended to include:

  • Anyone who is connected with the partner as in (2) above.

7) Individuals are connected with a company if:

  • they have control; or
  • they and connected persons have control.

8) In relation to a company an individual is connected with:

  • any company or individual with whom they act to secure control or exercise control over that company;
  • any company or individual who acts on their instructions in securing or exercising control of that company.

Note: Directors of a company are not necessarily connected persons in relation to transactions amongst themselves unless they are relative (see 1) or partners (see 5).

9) A company is connected with another company if:

  • the same person has control of both. Persons who are connected will each have control of both companies.
  • it controls another company where a group of two or more persons* have control of both (*they need not be connected).

Note: ‘Control’ is defined in s.226 and 416 of Income and Corporation Taxes Act 1988.