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HMRC internal manual

VAT Insurance

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Section 839 Taxes Act 1988: Connected Persons

Extract from the Taxes Act 1988.

839 Connected Persons

839(1) For the purposes of, and subject to, the provisions of the TaxAct, which apply this section, any question whether a person is connected with anothershall be determined in accordance with the following provisions of this section (anyprovision that one person is connected with another being taken to mean that they areconnected with one another).

839(2) A person is connected with an individual if that person is theindividual’s wife or husband, or is a relative of the wife or husband of a relative,of the individual or of the individual’s wife or husband.

839(3) A person, in his capacity as trustee of a settlement, isconnected with -

  1. any individual who in relation to the settlement is a settlor,

  2. any person who is connected with such an individual, and

  3. any body corporate which is connected with that settlement.

In this sub section “settlement” and “settlor” have the samemeaning as in Chapter 1A of Part XV (see section 600G (1) and (2)).

839(3A) For the purpose of subsection (3) abve a body corporate isconnected with a settlement if -

  1. it is a close company (or only not a close company because it is not resident in the United Kingdom) and the participators include the trustees of the settlement; or

  2. it is controlled (within the meaning of section 840) by a company falling within paragraph (a) above.

839(4) Except in relation to acquisitions or disposals of partnership assets pursuantto bona fide commercial arrangements, a person is connected with any person with whom heis in partnership, and with the wife or husband or relative of any individual with whom heis in partnership.

839(5) A company is connected with another company -

  1. if the same person has control of both, or a person has control of one and persons connected with him, or he and persons connected with him, have control of the other; or

  2. if a group of two or more persons has control of each company, and the groups either consist of the same persons or could be regarded as consisting of the same persons by treating (in one or more cases) a member of either group as replaced by a person with whom he is connected.

839(6) A company is connected with another person if that person has control of it orif that person and persons connected with him together have control of it.

839(7) Any two or more persons acting together to secure or exercisecontrol of a company shall be treated in relation to that company as connected with oneanother and with any person acting on the directions of any of them to secure or exercisecontrol of the company.

839(8) In this section –

“company” includes any body corporate or unincorporatedassociation, but does not include a partnership, and this section shall apply in relationto any unit trust scheme as if the scheme were a company and as if the rights of the unitholders were shares in the company;

“control” shall be construed in accordance with section416; and

“relative” means brother, sister, ancestor or linealdescendants.

In relation to any period during which section 470(2) has effect thereference above to a unit trust scheme shall be construed as a reference to a unit trustscheme within the meaning of the Prevention of Fraud (Investments) Act 1958 or thePrevention of Fraud (Investments) Act (Northern Ireland) 1940.

History - S.893 (3) substituted for previous version, and s. 839(3A)added, by FA 1995, s. 74 and Sch. 17, para 20 for 1995-6 and subsequent years ofassessment.

S.839 (8) repealed in part (words at end of sub section relating toformer meaning of unit trust scheme) by FA 1987, Sch. 16, Pt. VI, with effect from 29April 1988 by virtue of SI 1988/745.

Derivation (as originally enacted) - ICTA 1970, s. 533.

Cross references - S.591D (8): s. 839 applies for the purposes of s.591D, relating to the cessation of approval of certain retirement benefits schemes.

S.660G. “settlement” includes any disposition, trust,covenant, agreement, arrangement or transfer of assets and “settlor” means anypersons by whom the settlement was made.

Sch.7, para 4: application of s. 839 in determining employment with aperson who is connected with employer.

Sch. 28B, para. 13(2): s. 839 applied for purposes of determiningqualifying holdings in relation to venture capital trusts.

Note - TCGA 1992, s. 286: corresponding provision for capital gainstax.

840 Meaning of “control” in certain contexts

840 For the purposes of, and subject to, the provisions of the TaxActs which apply this section, “control”, in relation to a body corporate, meansthe power of a person to secure -

a. by means of the holding of shares or the possession of votingpower in or in relation to that or any other body corporate; or

  1. b. by virtue of any powers conferred by the articles of association or other document regulating that or any other body corporate,

  2. that the affairs of the first-mentioned body corporate are conducted in accordance with the wishes of that person, and, in relation to a partnership, means the right to a share of more than one-half of the assets, or of more than one-half of the income, of the partnership.

Derivation - ICTA 1970, s.534.