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HMRC internal manual

Company Taxation Manual

Close companies: loans to participators: material interest


A person can have a material interest through control of share capital or entitlement to a portion of the company’s assets on its winding up.

A person has a material interest in a company if he, either on his own or with one or more associates, or if any associate of his with or without any such associates -

  • is/are the beneficial owner(s) of, or able directly or through the medium of other companies or by any other indirect means to control, more than 5% of the ordinary share capital.

Ordinary share capital means all the issued share capital, however described, of the company, other than share capital carrying a right to a dividend only at a fixed rate and no other right to share in the company’s profits.

  • possesses, or is entitled to acquire, such rights that would in the event of the winding up of the company or any other circumstances, give an entitlement to receive more than 5% of the assets which would then be available for distribution among the participators.