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Readers’ forum: Connected persons

30 March 2021
Issue: 4786 / Categories: Forum & Feedback
Are these companies ‘connected’ for tax purposes?

Two companies have recently entered into a transaction the tax treatment of which would depend on whether they are connected with each other for tax purposes.

Burrow Limited is a UK company whose 100 ordinary shares are equally owned by James and his wife Lily. Willow Limited is also a UK company whose 100 ordinary shares are equally owned by Fred and George – the adult sons of James and Lily.

We referred to the four tests under which a company would be connected to another company as set out in CTA 2010 s 1122(2) but could not reach a clear conclusion.

Our understanding of the criteria is that s 1122(2)(a) and s 1122(2)(d) are not met due to neither company being under the control of ‘the same person’ or the same ‘group of two or more persons’.

It is less clear whether...

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