Nichola Ross Martin's Tax Consultancy

Does a loan creditor control the company?

A loan creditor is not treated as controlling the company if:

• There is no past or present connection between them.
• The loan company is not a close company, or it is a bona fide loan creditor (e.g. a bank/financial institution/private equity)

Step1:

Work out which individuals are associated with each other.

An individual's associates are:

• Spouse or civil partner
• Blood relatives*
• Business partners**
• The beneficiary of a trust will be an associate of the trustees.
• The settlor of a trust will be an associate of beneficiaries and trustees.

* if there is no commercial interdependence between companies, associated relatives will only include minor children. 

**Companies controlled by business partners are not associated providing that there are no relevant tax planning arrangements.

Step 2:

• For each individual, attribute the rights of each of their associates for each of the control tests above. 
• Do not attribute the rights of associates' associates.

Step 3:

• Identify which companies are controlled by the same individual or individuals.
• Where two or more individuals control a number of companies identify any irreducible groups in common.

Step 4:

• Exclude any companies which are dormant.

Step 5:

• Work out which controlling combination controls the greatest number of companies.

Step 6:

• Enter number of associated companies on each company's tax return

Need help?
Detailed guidance and examples are provided in these Practical Tax Guides:

• Close companies and control
• Associated company tests