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HMRC internal manual

Capital Gains Manual

Tainting - companies controlled by defined persons

TCGA92/Sch5/para9(9) - (10)

The definition of defined person in TCGA92/Sch5/para9(7) includes companies that are controlled by individuals who are a defined person and companies associated with those companies. In theory the issues discussed in CG38510 could also apply in very limited circumstances.

For example, if the settlor’s adult children were the life tenants of a settlement created before 19 March 1991 that would not be a qualifying settlement until 6 April 1999 because of the age of the settlement. If the trustees controlled a close company their control would be attributed to the life tenants for the reasons explained in CG38510. If the company received a benefit from the settlement it would be caught by the fourth condition in CG38520, breach of trust. Because the life tenants are treated as controlling the company the settlement would become a qualifying settlement. As explained in CG38510 Extra-Statutory Concession D40 prevents this unless the life tenants are participators in the company in their own right.