CA11630 - General: Definitions: Connected Persons

CAA01/s575, s575A

This is how you decide if one person is connected with another.

Individual

Broadly, two individuals, Mick and Keith, are connected if they are relatives, Mick is Keith’s spouse or civil partner; or they are related by marriage or civil partnership.

In more detail, Mick and Keith are connected if

  1. Mick is Keith’s spouse or civil partner, or
  2. Mick is Keith’s relative, or
  3. Mick is the spouse or civil partner of a relative of Keith, or
  4. Mick is a relative of Keith’s spouse or civil partner, or
  5. Mick is the spouse or civil partner or a relative of Keith’s spouse or civil partner.

A relative is a brother, sister, ancestor or lineal descendant. This means that people like cousins are not relatives for the purposes of this definition.

Example

Bob and Carolyn live together. Bob and David are brothers and Bob and Jesse are cousins. Carolyn is not connected with David or Jesse while she lives with Bob. If Bob and Carolyn get married Carolyn becomes connected with David because Carolyn is married to Bob and David is Bob’s brother. She does not become connected with Jesse because Jesse is not a relative of Bob’s for the purposes of the definition.

Trustee

A person who is the trustee of a settlement is connected with

    1. an individual who is a settler in relation to the settlement,
    2. a person connected with such an individual, or
    3. a close company whose participators include the trustees of the settlement, or
    4. a company not resident in the UK which would be a close company whose participants include the trustees of the settlement if it were resident, or
    5. any body corporate controlled by a company within c) or d), or
    6. if the settlement is the principal settlement in relation to one or more sub-fund settlements, a person in the capacity as trustee of such a sub-fund settlement, or
    7. if the settlement is a sub-fund settlement in relation to a principal settlement, a person in the capacity as trustee of any other sub-fund settlements in relation to the principal settlement.

This is where you find definitions if you need them.

Principal settlement is defined in paragraph 1 Sch.4ZA TCGA 1992.

Settlement is defined in Chapter 5 Part 5 ITTOIA 2005.

Sub-fund settlement is defined in Para 1 Sch.4AZ TCGA 1992

Settlement and settler are defined in s620 ITTOIA 2005.

If a settlement would have no trustees treat any person in whom the property comprised in the settlement is for the time being vested, or in whom the management of that property is for the time being vested as a trustee.

Partner

A member of a partnership is connected with

    • any other partner in the partnership, or
    • the spouse or civil partner of any other partner, or
    • a relative of any other partner.

This definition does not apply to acquisitions or disposals of partnership assets pursuant to genuine commercial arrangements.

Example

David, Stephen and Graham are in partnership. This means that David is connected with Stephen’s civil partner and Graham’s wife. David is also connected with Stephen’s parents and Graham’s daughter.

The partnership of David, Stephen and Graham decides to sell a caravan that it no longer needs. It advertises the caravan in the local paper. Graham’s daughter sees the advertisement and buys the caravan. The sale is not a connected person sale because the sale of the caravan is a genuine commercial arrangement.

Company

A company is connected with another company if

  • the same person has control of both companies,
  • a person, Alan, has control of one company and persons connected with Alan have control of the other,
  • Alan has control of one company and Alan together with persons connected with Alan have control of the other, or
  • each company is controlled by a group of two or more persons and the groups either consist of the same persons or could be regarded as consisting of the same persons if in one or more cases a member of either group were replaced by a person with whom the member is connected.

Example

Robbie controls Cripple Creek Ltd. His sister and brother control Dixie Productions Ltd. Cripple Creek Ltd. and Dixie Productions Ltd. are connected.

A company is connected with another person if

  • the person has control of the company, or
  • the person together with persons connected with them have control of the company.

Example

Don, Glenn and Joe are in partnership so they are connected. Together they control Desperado Ltd. This means that Desperado Ltd. is connected with Don, with Glenn and with Joe.

In relation to a company any two or more persons acting together to secure or exercise control of the company are connected with

  • one another, and
  • any person acting on the directions of any of them to secure or exercise control of the company

The above rules about control for a company also apply to

  • any body corporate or
  • unincorporated association apart from a partnership. or
  • unit trust scheme.

When you apply the rules to a unit trust scheme treat the rights of the unit holders as shares in the company.