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HMRC internal manual

Corporate Finance Manual

Loan relationships: special types of security: connected companies and discounted securities: meaning of connection


S407 and S408  were repealed by FA15. They no longer apply to loans entered into on or after 3 December 2014. For loans entered into before this date this treatment continues until 31 December 2015 (or until the debt is modified). For more details, please see CFM37330.

DDS: Meaning of connection

For the purposes of CTA09/S407, connection between companies is determined in accordance with CTA09/S408, which states that there is a connection between two companies at any time in the accounting period where

  • one of the companies has control of, or a major interest in, the other, or
  • both the companies are under the control of the same person.

This is the CTA09/S466 definition of connection, expanded to include a major interest as well as a control test.


Control has the same definition as CTA09/S472 - essentially owning most of the shares in a company, or being able to direct how the company operates. It excludes shares held on trading account.

Companies are not connected where they are under the common control of the Crown.

There are more details at CFM35120.

Major interest

Major interest is defined in CTA09/S473. A company has a major interest in another company where

  • it and another person taken together control the other company, and
  • each have at least a 40% interest in the company (excluding shares held on trading account).

There are more details at CFM35920.


Where the creditor satisfies the conditions of CTA09/S469, which essentially excludes companies dealing in debt, there is deemed to be no connection to the issuer of the security. There is more detail at CFM35130.