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HMRC internal manual

Company Taxation Manual

Close companies: close investment holding companies: definition

CTA2010/S34 ICTA88/S13A (1) & (2)

The statutory rules - which are not linked to the definition of an ‘investment company’ in CTA2009/S1219 (see CTM08020) - define a close investment-holding company (CIC) in a negative way. In broad terms, a close company will be a CIC if it does not exist wholly or mainly for the purpose of trading commercially or investing in land for (unconnected) letting or acting as a holding or service company within a group which exists wholly or mainly to trade or invest in land for letting.

The full statutory definition is found in CTA2010/S34 (1) and (2), which state that a close company - referred to as the ‘relevant company’ - is a CIC unless throughout the accounting period it exists wholly or mainly for one or more of the following purposes:

  1. the purpose of carrying on a trade or trades on a commercial basis,
  2. the purpose of making investments in land or estates or interests in land in cases where the land is, or is intended to be, let to persons other than:

i) any person connected with the relevant company, or

ii) any person who is the wife or husband of an individual connected with the relevant company, or is a relative, or the wife or husband of a relative, of such an individual or of the husband or wife of such an individual,

  1. the purpose of holding shares in and securities of, or making loans to, one or more companies each of which is a qualifying company or a company which:

i) is under the control of the relevant company or of a company which has control of the relevant company, and

ii) itself exists wholly or mainly for the purpose of holding share in or securities of, or making loans to, one or more qualifying companies,

  1. the purpose of co-ordinating the administration of two or more qualifying companies,
  2. the purpose of a trade or trades carried on on a commercial basis by one or more qualifying companies or by a company which has control of the relevant company, and
  3. the purpose of the making, by one or more qualifying companies or by a company which has control of the relevant company, of investments as mentioned in paragraph (b) above.

The meaning of:

  • ‘purpose’ is discussed in CTM60720,
  • ‘wholly or mainly’ is discussed in CTM60730,
  • ‘qualifying company’ is given at CTM60750.

In considering whether a company is a CIC, you need not make extensive enquiries. But in the normal course of screening or examining accounts there may be information that suggests that the company is a CIC, for example:

  • the company may have a preponderance of (non-rental) investment income, or
  • there is evidence of letting to connected persons (individuals or companies), or
  • the company is in liquidation (see CTM60790).