CTM03949 | Small profits rate: financial year 2023 onwards: attribution to persons of rights and powers of their partners: commercial interdependence with companies controlled by associates

When deciding if a person or group of persons has control of a company as defined in CTA10/S450, the rights of a person taken into account for this purpose include those of the person’s nominees, together with rights the person is entitled to acquire – see CTM60140.

In addition, when deciding if companies are under the common control of a person or group of persons, and therefore associated, in some limited circumstances the rights held in other companies by persons to whom the person or persons are linked as ‘associates’ as defined in CTA10/S448 are also taken into account by virtue of CTA10/S451. The circumstances are those where there is substantial commercial interdependence between the companies concerned.

The substantial commercial interdependence criterion is set out in legislation with the rules summarised at CTM03950. Subject to this, there are attributed to a person the rights of both

• associates (see CTM60150), and

• any companies which the person controls, or the person and associates together control.

All combinations must be tried, including all, some and none of the possible attributions. If any combination of person or persons satisfy the tests in CTA10/S450, then control has been established. This view was confirmed by the House of Lords in R v Commissioners of Inland Revenue ex parte Newfields Developments Ltd [2001] UKHL 27. The rights of an associate’s nominees are included, see above, but not the rights of associates of associates.

This case was followed by Gascoines Group Ltd v Inspector of Taxes [2004] STC 844 in which it was held that a settlor of a trust was taken to have control of the trust owned company by way of his association with the trustees (his children).