Commentary

D3.108 Definition of a 'close company'—control test

Corporate tax
Corporate tax | Commentary

D3.108 Definition of a 'close company'—control test

Corporate tax | Commentary

D3.108 Definition of a 'close company'—control test

A company is close if it is either controlled by five or fewer participators, or any number of participators who are directors1. The key concepts of what constitutes control and a director are discussed at D3.103.

Control by five or fewer participators

Provided it is not within one of the exemptions described in D3.113, a company is close if it is 'controlled' by five or fewer participators2.

In order to ascertain whether a company is controlled by five or fewer participators, the starting point is the current list of shareholders. In most cases, it will be clear whether or not a company is close. Either there are a large number of shareholders none of whom holds a substantial number of shares (in which case the company will not be close) or the greater part of the share capital is held by five or fewer participators without the need to consider attribution of rights of associates (in which case the company will be close).

Where the shareholders include trustees, personal representatives or one or more other companies it may be necessary to carry out several tests, any one of which may show that the company (the relevant company) is under the control of five or fewer participators.

In such circumstances it will be necessary to attribute rights of associates, by

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