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HMRC internal manual

Capital Gains Manual

Non-resident companies: indirect interests: introduction

Without special rules UK resident shareholders or participators could avoid the TCGA92/S13 charge by placing another non-resident company between themselves and the company making the gain. TCGA92/S13(9) prevents this by allowing us to look through a chain of non-resident companies. The gain is apportioned to the first tier of UK residents or non-resident trusts in the chain of interests. For TCGA92/S13(9) to apply each company in the chain must itself satisfy the basic conditions outlined in CG57220.

Therefore each company must be

  • a company that is not resident in the UK

and

  • a company that would be a close company if it was resident in the UK.

Example 1

Mr A UK resident shareholder owns 100% of

B Ltd non-resident close company which owns 100% of

C Ltd non-resident close company which owns 100% of

D Ltd non-resident close company.

Any gains of D Ltd can be apportioned to Mr A because TCGA92/S13(9) allows you to look through the chain of non-resident closely controlled companies.

Example 2

Mr A UK resident shareholder owns 100% of

B Ltd UK resident company which owns 100% of

C Ltd non-resident close company which owns 100% of

D Ltd non-resident close company.

Any gains of D Ltd can be apportioned to B Ltd but not Mr A. This is because B Ltd is the first UK resident shareholder in the chain.

Example 3

Mr A UK resident shareholder owns 100% of

B Ltd closely controlled non-resident company which owns 100% of

C Ltd UK resident close company which owns 100% of

D Ltd non-resident close company.

Any gains of D Ltd can be apportioned to C Ltd but not Mr A even though Mr A owns shares in B Ltd which is a closely controlled non-resident company. (Gains which accrue to B Ltd in its own right on disposal of its own assets can be apportioned to Mr A.)