SDLTM09925 - SDLT - increased rates for non-resident transactions: Non-resident in relation to a chargeable transaction: Companies, second condition, non-UK control test, attribution of rights and powers - para 10 Sch 9A FA03

(All legislative references are to Sch 9A FA03 unless otherwise stated)

For the purposes of the close company rules in Chapter 2, Part 10 CTA 2010, in addition to the rights and powers which a participator possesses (or is entitled to acquire), section 451 CTA 2010 provides that the rights and powers of certain other persons may be attributed to him or her and count as his or her rights for the purpose of determining who controls a company. See CTM60140 for more details on the rights and powers attributed to a participator.

For the purposes of the surcharge, the following limitations are placed on the rights and powers that are capable of being attributed to another person by virtue of section 451(4) CTA (paragraph 10(1)):

  • attributions may not be made between persons who are business partners only (paragraph 10(2));
  • where persons A and B are spouses or civil partners of each other, are living together and A is UK resident in relation to the chargeable transaction, the rights and powers of person A may not be attributed to person B (paragraph 10(3)); and
  • attributions may not be made where a person’s rights and powers in relation to their interest in a company is de minimis (paragraph 10(4)).

For the purposes of the surcharge, a person’s interest in a company is “de minimis” if:

  • the proportion of the share capital or issued share capital in the company that they possess or are entitled to acquire is less than 5% (paragraph 10(5)(a));
  • the proportion of the voting rights in the company that they possess or are entitled to acquire is less than 5% (paragraph 10(5)(b));
  • the issued share capital in the company that they possess or are entitled to acquire would, on the assumption that the whole of the income of the company were distributed among the participators, entitle them to receive less than 5% of the income so distributed (paragraph 10(5)(c)). Any rights they have as a loan creditor are disregarded (paragraph 10(6)); and
  • their rights in the company entitle them, in the event of the winding up of the company or in any other circumstances, to less than 5% of the assets of the company which would then be available for distribution among the participators (paragraph 10(5)(d)).

Section 1011 of the Income Tax Act 2007 applies for the purposes of determining whether spouses or civil partners are living together. Under this section, individuals who are married to, or are civil partners of, each other are treated as living together unless:

  • they are separated under an order of a court of competent jurisdiction;
  • they are separated by deed of separation; or
  • they are in fact separated in circumstances in which the separation is likely to be permanent.