SDLTM09915 - SDLT - increased rates for non-resident transactions: Non-resident in relation to a chargeable transaction: Companies, second condition, non-UK control test - para 9 Sch 9A FA03

The non-UK control test must be read in conjunction with the close company rules set out in Chapter 2 of Part 10 of the Corporation Tax Act 2010.

Meaning of control (section 450 CTA 2010)

A person is treated as having control of a company if they exercise, are able to exercise, or are entitled to acquire, direct or indirect control over the company’s affairs. There are several ways in which this may be done (see CTM60210 for more details):

  • control over the affairs of the company;
  • control through voting power;
  • control through share capital or through issued share capital;
  • control over income of the company; or
  • control over assets of the company.

Non-UK control test

For the purposes of the surcharge, a company meets the “non-UK control test” in relation to a chargeable transaction if it meets the basic definition of a close company within the meaning given by Chapter 2, Part 10 CTA 2010, but with the following modifications (paragraph 9(1)):

  • section 439 CTA 2010 applies as if references to a “participator” were to “relevant participator”, and references to “five or fewer participators” were to “any number of relevant participators (paragraph 9(2));
  • section 444 CTA 2010 applies as if a condition A were omitted (paragraph 9(4)), i.e. for the purposes of the surcharge, a close company includes a company controlled by one or more companies, none of which is a close company, and it cannot be treated as a close company except by taking a non-close company as one of the five or fewer participators requisite for its being so treated;
  • section 446 CTA 2010 is omitted (paragraph 9(5)), i.e. for the purposes of the surcharge, a close company includes particular types of quoted companies in which the public holds 35% or more of the voting power; and
  • section 451 CTA 2010 (attribution of rights and powers) has effect subject to the limitations set out in paragraph 10 (paragraph 9(6)).

A “relevant participator” means a participator who is non-resident in relation to the chargeable transaction, and is not a general partner in a limited partnership (paragraph 9(3)), although see SDLTM09920 for an exclusion to the latter rule.

When determining whether a participator is non-resident in relation to the chargeable transaction, the appropriate residence test must be used, including any special rules that may apply.