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Connected under s993 ITA 2007?

I have a client and his (non-married/non-cp) life partner. He has a company with a six-figure sum sitting in the bank and he is planning the following:

1. Set up a UK Newco owned 50:50 with his life partner

2.lend the cash to Newco from his existing company

3. Newco will buy a residential property in another EU country which will be let as holiday accommodation mainly.

4. They may visit it for a few weeks a year for holidays.

For the purposes of the relief from BIK in ITEPA 2003 s100B the two companies must not be connected (unless a commercial rate of interest is charged)

I think they pass all the tests in ITA 2007 s993 except I'm not sure about s993(7). As they will be able to control the new company together this sub-section seems to deem them to be connected so that the companies become connected. This seems a bit absurd as it leads to the situation where virtually all companies are connected in this type of situation, regardless if the individuals are "connected" under s993 (1)-(6).

Or am I being stupid? If so please tell me why!!


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The two companies are connected because of the combined effect of ITA 2007, s. 993(7) and s. 993(5)(c) (as well as ITEPA 2003, s, 100B(9)(a)). "This type of situation" is why s. 993(7) is there.


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