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HMRC internal manual

Inheritance Tax Manual

Legal background: connected persons

Other than any specific reference to the meaning of ‘connected persons’ for Inheritance Tax, whether a person is connected with another has to be decided by reference to TCGA92/S286. The subsections are as follows:

TCGA92/S286 (1): any provision that one person is connected with another is to be taken as meaning they are connected with one another.

TCGA92/S286 (2): a person is connected with an individual (X) if that person is

  • the husband, wife or civil partner (IHTM11032) of X, or
  • a relative of X, or
  • the husband, wife or civil partner of a relative of X, or
  • a relative of the husband, wife or civil partner of X.

TCGA92/S286 (3): a person in his capacity as trustee of a settlement is connected with

  • the settlor, and
  • any person connected with the settlor, and
  • any body corporate connected with the settlement.

TCGA92/S286 (3A): a body corporate is connected with a settlement if

  • it is a close company and the participators include the trustees of the settlement, or
  • it is controlled by such a close company.

TCGA92/S286 (4): a partner (except in relation to acquisitions or disposals of partnership assets pursuant to bona fide commercial arrangements) is connected with

  • any person he is in partnership with, and
  • the husband, wife or civil partner of any person he is in partnership with, and
  • a relative of any person he is in partnership with.

TCGA92/S286 (5): a company is connected with another company if

  • the same person has control of both, or
  • the persons controlling both companies are connected, or
  • there are certain common links of control.

TCGA92/S286 (6): a company is connected with another person if

  • that person has control of the company, or
  • that person and persons connected with him together have control of the company.

TCGA92/S286 (7): persons acting together to secure or exercise control of a company are connected with

  • each other, and
  • persons acting on their direction.