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HMRC internal manual

Company Taxation Manual

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HM Revenue & Customs
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Close companies: close investment holding companies: lettings to connected persons

CTA2010/S34 (2)(b) and (3) (formerly ICTA88/S13A (2)(b)), CTA2010/S1122 (2) and (3) (formerly ICTA88/S839 (5) & (6))

A company will not be a close investment-holding company if throughout the accounting period it exists wholly or mainly for the purpose of investing in land or interests in land (including buildings) where the land is, or is intended to be, let.

But a company will not qualify for exclusion under Section 34 (3) if the land etc is let, or intended to be let, to a person who is connected with the relevant company.

‘Connected’ has the meaning given by CTA2010/S1122. That is, under Section 1122 (2), a company is connected with another company:

  1. if the same person has control of both, or a person has control of one and persons connected with him, or he and persons connected with him, have control of the other, or
  2. if a group of two or more persons has control of each company, and the groups either consist of the same persons or could be regarded as consisting of the same persons by treating (in one or more cases) a member of either group as replaced by a person with whom he is connected.

Under Section 1122 (3), a company is connected with another person if that person has control of it, or if that person and persons connected with him together have control of it.

Furthermore, where an individual is connected with the relevant company, it will not qualify if the land is let, or intended to be let, to the individual’s spouse or a ‘relative’ of that individual. For this purpose, ‘relative’ has the meaning given by Section 1123 (1), that is, a brother, sister, ancestor or lineal descendant.

Nor will the company qualify if the letting is to:

  • a ‘relative’ of the individual’s spouse, or
  • the spouse of a ‘relative’ of the individual.

For example, if land or buildings are let to the father-in-law of an individual connected with the company, the company will not qualify for exclusion because the letting is to a ‘relative’ of that individual’s spouse.