Finance Act 1972

Meaning of close company

1 (1) Section 282 of the Taxes Act (which defines " close company ") shall be amended as follows.

(2) For subsection (2) (company treated as close company if more than half of apportionable income etc. could be apportioned among five or fewer participators or among participators who are directors) there shall be substituted—

“(2) Subject to section 283 below, a company resident in the United Kingdom (but not falling within subsection (1)(b) above) is also a close company if—

(a) on the assumption that it is so, or

(b) on the assumption that it and any other such company or companies are so,

more than half of any amount falling to be apportioned under Schedule 16 to the Finance Act 1972 in the case of the company (including any sum which has been apportioned to it, or could on either of those assumptions be apportioned to it, under that Schedule) could be apportioned among five or fewer participators, or among participators who axe directors.

In ascertaining under this subsection whether any amount could be apportioned among five or fewer participators or among participators who are directors, account shall, in cases where an original apportionment and any sub-apportionment are involved, be taken only of persons among whom that amount could be finally apportioned as the result of the whole process of original apportionment and sub-apportionment and those persons shall be treated as participators or directors if they are participators or directors of any company in the case of which either an original apportionment or any sub-apportionment could be made.”

(3) For subsection (4) (company not to be treated as close company if under control of any company which is not a close company) there shall be substituted—

“(4) A company is not to be treated as a close company—

(a) if—

(i) it is controlled by a company which is not a close company, or by two or more companies none of which is a close company ; and

(ii) it cannot be treated as a close company except by taking as one of the five or fewer participators requisite for its being so treated a company which is not a close company ;

(b) if it cannot be treated as a close company except by virtue of paragraph (c) of section 302(2) of this Act and it would not be a close company if the reference in that paragraph to participators did not include loan creditors who are companies other than close companies.

(5) References in subsection (4) above to a close company shall be treated as applying to any company which, if resident in the United Kingdom, would be a close company.”