CTM60150 - Close companies: tests: associates
CTA10/S448
When considering whether a company is close or not, and when considering whether a charge arises under CTA10/455 or 464A, you should establish who the participators in the company are. Once you have established who the participators are, you should then consider their associates and make any attribution of rights required.
The word associate has a general meaning, but in this context it has a specific meaning set out in CTA10/S448. A person’s (P’s) associates are:
- P’s relatives;
- P’s partners in any partnership;
- The trustees of a trust P is ‘involved with’ (see below); and
- The personal representatives of a deceased person (where P has an interest in the estate).
The terms above are broad categories which are set out in more detail below.
P may be a natural or legal person (usually an individual or a company), however not all the associates rules will apply to both. For example, only individuals will have relatives.
Relatives
Relative is defined quite narrowly in CTA10/S448(2) and only includes immediate relatives and lineal ascendants and descendants. Specifically, it includes:
- P’s husband, wife, or civil partner;
- P’s parents and remoter forebears;
- P’s children and remoter issue; and
- P’s siblings.
Separated spouses should be regarded as associated with each other but divorced persons should not. Other relatives in should be regarded as associated only if there is a blood relationship, for example, half-brothers are associated but stepbrothers are not.
Partners
Partner here refers to member of a partnership (for example a general partnership, Limited Partnership, Scottish Limited Partnership or Limited Liability Partnership) in which P is also a member.
It does not include any ‘business partner’ who P is accustomed to dealing with outside of the more formal partnerships outlined above.
Trustees
The trustees of a settlement will be the associates of P where:
- P or a relative of P (whether living or dead) is the settlor of the settlement; or
- P is the beneficiary of the settlement.
‘Settlement’ includes any disposition, trust, covenant, agreement or arrangement. The ‘Settlor’ is the person who made the settlement. This is generally the person who has provided, or promised to provide, funds for the purpose of the settlement. The settlor may have done this directly or indirectly, or they may have done this through ‘reciprocal arrangements’, i.e. where one person has made a settlement in exchange for another person making a settlement in return.
See CTM61000 onwards regarding close companies connected with a settlement.
Personal representatives
The situation for trusts and settlements is duplicated for will trusts Where P has an interest in the estate of someone who is deceased, the personal representatives of the deceased person are P’s associates.