Mr A, Mr B, Mr C and Mr D are in a professional partnership. Mr A has a company (A Gib Ltd) that owns a yacht in Gibraltar (i.e. not dormant but apparently not trading). Mr B has a company (B Ltd) in the UK that trades, Mr C's wife has a company (Mrs C Ltd) in the UK that trades.
How many associated companies would a new company (D Ltd) have, that Mr D is thinking of setting up? (All companies are 100% owned by the relevant individual).
John R
Replies (6)
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One (B Ltd)
I believe that "partner" in Section 417(3) does include business partner.
It is for this reason that if an individual invests in (for example) a Film Partnership, then a company that he controls is in danger of being associated with every other company controlled by a member of the Partnership.
Agreed
Cook v Billings would appear to confirm that business partners are associated though it does seem unfair (I know that tax law is not meant to be fair) that non-spouse relatives are associated only where there is commercial interdependence where as non-relative business partners will be associated whether or not there is interdependence.
Who exactly are the shareholders of C Ltd? Tentative conclusion
First of all "associates" in ICTA s417 (3)(a)include partners. The term is not defined, but clearly includes professional partners vis a vis one another.
So in the first place any company controlled by Mr D or by any of his partners will be an associated company for the purposes of s416.
Looking only at D Ltd, which companies are asssociated with it? It is controlled by Mr D, so we have to include companies controlled by Mr D or by his partners, that is to say A Gib ltd and B Ltd.
What about C Ltd?
Mrs C is not an associate of Mr D, as she is neither his relative [as defined in s417(4) nor his partner.
So an anomalous situation arises. In looking at C Ltd, it has three associated companies.
Looking however at B Ltd or D Ltd, they each have only two asssociated companies , as C Ltd is not included in the definition of "associated " companies, being controlled neither by their specific controlling participators, nor by their own associates.
If, however, Mr C has just one share in C Ltd, then D ltd also has three associated companies ! That follows from looking at Mr C, who, now together with his associates controls all four companies.
In simple terms , associates of associates are not included in determining "control".
None
I understand that 'partner' in the context of determining associates, does not mean a business partner.