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HMRC internal manual

Employment Income Manual

The benefits code: meaning of

Section 68 ITEPA 2003

An Inspector must decide whether a director has a material interest in a company. Submit cases of doubt or difficulty to Business Tax (Close Companies).

An individual has a material interest in a company if either Test A or Test B below is satisfied.

Test A

Any of the following is the beneficial owner of, or is able to control directly or indirectly more than five per cent of the company’s ordinary share capital:

  • the individual on his own or with any one or more of his associates, or
  • an associate of his, with or without other associates of his.

Test B

  • The company is a close company and
  • more than five per cent of the whole of the distributable income falling to be apportioned under Part XI ICTA 1988 could be apportioned to
    • the individual, together with his associates if any or
    • any associate of his or
    • any associates of his taken together.

“Associate” has the meaning given to it by Section 417(3) ICTA 1988 exceptthat the meaning of relative in that subsection has the meaning given to it by Section174(6) ITEPA 2003 (EIM26112).

For the meaning of:

  • control see EIM20213
  • distributable income see CTM61500 onwards.