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HMRC internal manual

Company Taxation Manual

HM Revenue & Customs
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Close companies: tests: associates

CTA/S448 (1) & (2) and CTA2010/S1069 (3) (formerly ICTA88/S417 (3) - (4), ICTA88/S681 (4))

An associate of a participator is:

  1. a person in any of the following relationships to the participator:

          i) husband or wife,

          ii) parent or remoter forebear,

          iii) child or remoter issue,

          iv) brother or sister,

          v) partner.

          Separated spouses should be regarded as associated with each other but divorced persons should not. Other relatives in (a)(ii) to (iv) should be regarded as associated only if there is a blood relationship, for example, half-brothers are associated but stepbrothers are not.

  1. the trustee or trustees of any settlement in relation to which the participator (or any relative of his or hers -living or dead - within (a)(i) to (iv)) is or was a settlor (but see the second subparagraph of CTM60170).
  2. where the participator is interested in any shares or obligations of the company which are subject to any trust or are part of the estate of a deceased person, the trustees of that trust or the personal representatives of the deceased. Where the participator is a company, any other company interested in those shares is also an associate.


CTA2010/S448 (1)(d) (previously ICTA88/S417 (3)(c)) starts with a test. The test is whether a person is ‘interested in’ (see CTM60160) shares or obligations which are subject to a trust or to the estate of a deceased person. If the person is ‘interested in’ the shares etc, then the trustees of the settlement or the personal representatives of the deceased will be associates of that person. An example of a person who is ‘interested in’ shares or obligations is a beneficiary of the settlement.

‘Settlement’ includes any disposition, trust, covenant, agreement or arrangement. ‘Settlor’ in relation to a settlement means any person by whom the settlement was made. A person is deemed to have made a settlement if he or she has made or entered into the settlement directly or indirectly and, in particular, if he or she has provided or under taken to provide funds directly or indirectly for the purpose of the settlement or has made with any other person a reciprocal arrangement for that other person to make or enter into the settlement. (See CTM61000 onwards as regards close companies connected with a settlement.)

On the authority of Willingale v Islington Green Investment Co 48TC547, a settlement does not include a will trust. Will trusts will be caught by CTA2010/S448 (1)(d) (previously ICTA88/S417 (3)(c)).