INTM436040 - Transfer pricing before CTSA

Meaning of control for Section 770 purposes

S773(2) says that for ICTA88/S770 and ICTA88/S772, control has the meaning given by ICTA88/S840.

S773(3) then goes on to extend ICTA88/S840 by attributing certain rights in determining whether a person has control over a body of persons.

General meaning of control

Section 840 defines control as 'the power of a person to secure…that the affairs of the…body corporate are conducted in accordance with [his] wishes.

That power must be held by specific means, i.e. by means of:

  • the holding of shares
  • the possession of voting power
  • powers conferred by the Articles of Association
  • powers conferred by another document which regulates the/a body corporate

The powers need not be held directly in the body corporate in question, but may be held in any other body (e.g. a parent company), providing that the holding confers the appropriate powers in the relevant entity.

In relation to a partnership, control 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.

Extended meaning of control for Section 770 purposes

ICTA88/S773(3) widens the meaning of control for the purposes of ICTA88/S770 and ICTA88/771, saying that whether any person (alone or with others) has control over a body of persons-

(a) there shall be attributed to him any rights or powers of a nominee for him, that is to say, any rights or powers which another possesses on his behalf or may be required to exercise on his direction or behalf;
(b) there may also be attributed to him any rights or powers of a person with whom he is connected (within the meaning of Section 839 but omitting subsections (5) to (7) and the exception in subsection (4)), including any rights or powers of a nominee for such a person, that is to say, any rights or powers which another possesses on behalf of such a person or may be required to exercise on his direction or behalf.

The control rules make it difficult to apply ICTA88/S770 to joint ventures with a 50/50 control split. This position changed with the advent of Schedule 28AA - see INTM432070.

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