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Parents connected to company?

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In the case of a company being owned equally by three siblings, would that company be connected to the siblings’ parents as defined by s.1122 CTA 2010? 

My conclusion is yes, however my doubt lies in s.1122(3)(b):

A company is connected with another person (“A”) if A together with persons connected with A have control of the company.”

It is persons connected with A that have control in this instance: not A together with...

Is that significant?

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By CTA
11th Dec 2020 10:52

As an afterthought: control is defined as in sections 450 and 451. Are the rights of the children (associates) simply attributed to the parents such that either parent (A) is considered to have control?

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Psycho
By Wilson Philips
11th Dec 2020 11:12

We've had this discussion (heated at times) before. My view is that it depends on the relevant provisions for which connection matters. The attribution of associates' rights is only relevant for Part 10. "Control" is more generally defined at s1124.

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By CTA
11th Dec 2020 11:27

Thank you Wilson. In this instance, connection is being considered in respect of s.53 FA 2003.

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Psycho
By Wilson Philips
11th Dec 2020 13:15

Others may disagree but I would say that A and the company are not connected for that purpose.

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By Tax Dragon
11th Dec 2020 14:02

Still?

OK. Well, I am one of those that disagree. I don't see there's much choice about that, since HoL decisions are still binding.

OP, this: https://www.accountingweb.co.uk/any-answers/deferred-consideration-on-sa... is one place you might warm your cockles.

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Replying to Tax Dragon:
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By CTA
11th Dec 2020 14:14

Cockles very much warmed! Thank you both for your input - it’s appreciated.

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Replying to Tax Dragon:
Psycho
By Wilson Philips
11th Dec 2020 15:01

Yes, still

The discussion there, which referenced the HoL decision, was about CGT. The CGT definition of connection/control specifically points to ss450 and 451. The SDLT provisions that the OP is considering here point to different definitions of connection and control, at ss1122 and 1124. Whether or not the attribution of rights per s450 should extend to cases beyond determination of close company status, ss1122 and 1124, which are the relevant provisions here, make no mention of such attribution.

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Replying to Wilson Philips:
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By Tax Dragon
11th Dec 2020 15:21

S1123: (1) In section 1122 and this section... "control" is to be read in accordance with sections 450 and 451 (except where otherwise indicated).

OP already pointed that out, IIRC.

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Replying to Tax Dragon:
Psycho
By Wilson Philips
11th Dec 2020 16:24

You're right, and I've made the schoolboy error of reading headings only and skipping s1123. On closer isnpection, it seems that s1124 applies only to provisions that specifically apply that provision. ie its definition of control has nothing to do with s1122. So, yes, I'm inclined to back-track and conclude that A probably should be treated as connected with the company.

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By CTA
11th Dec 2020 17:18

Sincere thanks to you both, much appreciated.

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By Tax Dragon
11th Dec 2020 17:57

What is curious (and I don't pretend my non-legal brain can get itself round this sort of thing) is the different ways that sections are invoked.

In the CGT thread I said that old s25(5) read: "In subsection (4) 'control' has the same meaning as in Part 10 (see sections 450 and 451)."

I referred to s288, which determines "control" for TCGA by saying that it: "shall be construed in accordance with sections 450 and 451..."

And s53 FA 2003 says: "Section 1122 of the Corporation Tax Act 2010 (connected persons) has effect for the purposes of this section."

"Same meaning" and "construed in accordance with" are easy enough. "Has effect" I find harder... because what s1122 itself says is: "This section has effect for the purposes of the provisions of the Corporation Tax Acts which apply this section (or to which this section is applied)." If s1122 itself has only corporation tax effects, and it gets invoked outside of the corporation tax acts, does it have only corporation tax effects in the new setting?

I'm sure the answer is no - on a purposeful interpretation if nothing else - but... well, as I said, I find the s53 wording less easy than the wording in the older sections (s288 and the defunct s25).

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Replying to Tax Dragon:
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By Tax Dragon
11th Dec 2020 19:11

I missed one, already quoted above:
In section 1122 and this section... "control" is to be read in accordance with sections 450 and 451 (except where otherwise indicated).

Read in accordance with. Again, perfectly straightforward.

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Replying to Tax Dragon:
Psycho
By Wilson Philips
11th Dec 2020 19:52

I read it thus:

Different parts of the CT Acts apply a different meaning of "control" (and/or "connection"). S1122 simply says that for those provisons that require s1122 to apply, it will so apply. Likewise s450 etc. What I don't read into it is that s1122 (or any other provision) cannot apply for the purposes of any other tax provisions if those other provisions so require.

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By Tax Dragon
11th Dec 2020 19:34

That makes a lot of sense. I agree.

Thank you.

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By frankfx
11th Dec 2020 18:37

Thread of the year?

Thank you Wilson.
Thank you Dragon.

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