Part 8Other reliefs

Chapter 1Interest payments

Loans for interests in close companies

395Meaning of “associate” in section 394

(1)

For the purposes of determining under section 394 whether an individual has a material interest in a company, in that section “associate”, in relation to that individual and company, means—

(a)

a relative or partner of the individual,

(b)

the trustees of a settlement in relation to which—

(i)

the individual is a settlor, or

(ii)

a relative of the individual (living or dead) is or was a settlor,

(c)

if the individual is interested in any shares or obligations of the company which are subject to a trust, the trustees of the settlement, and

(d)

if the individual is interested in any shares or obligations of the company which are part of the estate of a deceased person, the personal representatives.

(2)

But, despite subsection (1)(c), the trustees of an employee benefit trust are not regarded for the purposes of section 394 as the associates of an individual merely because the individual has an interest in shares or obligations of the company as a beneficiary of the trust, unless subsection (3) applies.

(3)

This subsection applies if at any time after 26 July 1989 the individual, alone or with associates, or an associate of the individual, alone or with other such associates—

(a)

has been the beneficial owner of more than 5% of the ordinary share capital of the company, or

(b)

has been able directly or indirectly to control more than 5% of that share capital.

(4)

In subsection (3) “associate” has the meaning given by section 549(4) of ITEPA 2003.

(5)

Sections 552 to 554 of ITEPA 2003 (attribution of interests in company) apply for the purposes of subsection (3) in relation to the individual as they apply for the purposes of the provisions listed in section 549(2) of that Act in relation to an employee.

(6)

In this section—

“control” F1is to be read in accordance with sections 450 and 451 of CTA 2010,

“employee benefit trust” has the meaning given by section 550 of ITEPA 2003 except that the reference in section 550(3) of that Act to 13 March 1989 is to be read as a reference to 26 July 1989, and

“relative” means spouse or civil partner, ancestor or lineal descendant or brother or sister.