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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Yes

Steve Kesby |
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