CFM36060 | Loan relationships: partnerships: connected company partners

Company partners connected through control

Under CTA09/S383, one company partner is connected with another if

• one controls the other, or

• both are under the control of the same person.

A company partner will control a partnership if it, alone or with another connected company partner, has rights to a share of more than one half of the assets or income of the partnership. This definition of control comes from CTA09/S472. See CFM35120.

A company partner is connected to another company partner if one controls the other or both are under common control.

Example

H Ltd owns 100% of the shares in both B Ltd and C Ltd.

The members of ABC partnership, and their profit shares, are

• Mrs A 30%

• B Ltd 50%

• C Ltd 20%

Each partner has lent £50,000 to the partnership. This lending is not performing an equity function.

B Ltd and C Ltd are under the common control of H Ltd and are therefore connected. Because of this connection, the interests of B Ltd and C Ltd can be combined. Together they are entitled to 70% of the partnership profits, so both B Ltd and C Ltd control the partnership.

B Ltd controls the partnership together with C Ltd.

C Ltd controls the partnership together with B Ltd.