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HMRC internal manual

National Insurance Manual

Employment Allowance: Connected persons – Companies - Control through fixed rate percentage shares

National Insurance Act Contributions 2014 - Schedule 1, Para 4

See NIM06590 before reading the contents of this page.

Fixed rate preference shares

If, at the beginning of a tax year, two or more companies (which are not charities) are connected with one another, then only one of them may claim the Employment Allowance. It is up to the companies to decide which company will make the claim. For this purpose, two companies will be connected with one another if one of them has control over the other, or both are under the control of the same person, or persons.

In determining if one company is under the control of another, fixed rate shares held by a company are ignored if the company holding them:

(a) is not a close company (in accordance with Chapter 2 of Part 10 CTA 2010- in particular see section 439 of that Act),

(b) takes no part in the management or conduct of the company which issued the shares, or the management or control of its business and

(c) subscribed for the shares in the ordinary course of a business which includes the provision of finance.

Definition of fixed rate preference shares

“Fixed rate percentage shares” means shares which:

(i) were issued wholly for “new consideration,” (which has the same meaning given by section 1115 of CTA 2010).

(ii) do not carry any right either as conversion into shares or securities of any other description or to the acquisition of any additional shares or securities, and

(iii) do not carry any rights to dividends other than dividends which:

  • are of a fixed amount or at a fixed rate per cent of the nominal value of the shares
  • together with any sum paid on redemption, represent no more than a reasonable commercial return on the consideration for which the shares were issued