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HMRC internal manual

International Manual

Controlled Foreign Companies: Control: Legal and economic control: Attribution rules


Various rights and powers are attributed to a person when determining whether a person or two or more persons control a non-UK resident company by reference to the rules for legal and economic control (including the 40% rule). This is to prevent control being circumvented in certain situations.

The rules apply to each person and provide that all the following rights and powers are attributed to each such person (“P”), to the extent that they would not otherwise be attributed to that person:

  • those that P (whilst he does not hold them at the relevant time) is either entitled to acquire in the future or which, in the future, he will become entitled to acquire;
  • those held by or through nominees and the like; and 
  • those held by connected persons - where both P and the connected person are UK resident.

The attribution rules are extended further where P is a UK resident person and is connected to another UK resident person. The attribution includes rights and powers which would be attributed to another UK resident person (identified as “Q”) who is connected to P on the assumption that “Q” were P. If a person is connected to Q, but not P, the rights and powers of that person are also attributed to P. So where there are three persons (for example, A, B and C) and A is connected to B and B is connected to C but A and C are not connected, so long as each is resident in the UK, any rights and powers of A are to be attributed to C and vice versa. Where there are more than three persons (from, say, A to Z) where, say, C is connected to D, D to E, E to F and so on, so long as all relevant persons are resident in the UK and there is a chain of connection between them, any rights and powers of any one of them are to be attributed to each other.

The rights and powers exercised by nominees are attributed to P where the rights and powers so far as they are required or may be required to be exercised on behalf of P, under P’s direction or for P’s benefit. In the case of a loan made by one person to another, these are not limited to rights and powers conferred by the terms of any security relating to the loan.

As well as the general attribution rules regarding future entitlement to rights and powers, consideration of future entitlement (or future entitlement to acquire) of rights and powers is extended to all the other ways that rights and powers can be attributed to a person by attribution or connection.

Finally, where the rights and powers a person has, or rights and powers to which he will, in the future, be entitled, can only be exercised jointly with another person (whether presently or in the future) such rights and powers are also to be attributed to the first person.

The question of whether one person is connected to another is determined in accordance CTA10/S1122 but subsection (4) of section 1122 (which treats, for example, partners in a joint venture as connected with each other by virtue of their respective interests in the joint venture) is disapplied for these purposes. As such, no attribution can be made from one joint venture partner to another under the connected party rules unless there is a connection between the partners other than through the joint venture itself.