D4.134 Closely held non-resident companies

Corporate tax
Corporate tax | Commentary

D4.134 Closely held non-resident companies

Corporate tax | Commentary

D4.134 Closely held non-resident companies

In the absence of specific legislation it would be possible for a UK-resident individual, company or trust to avoid a liability to capital gains tax by holding assets through a non-resident company. Such a company would not be within the charge to tax on its capital gains, unless it was carrying on a trade through a permanent establishment.

To counter this possible abuse, there is provision for certain gains made by non-resident companies that would be close companies (see D3.102) if they were resident in the United Kingdom1 (a non-resident company cannot itself be a close company) to be apportioned to the participators provided2:


    •     the participators3 of that company are resident in the United Kingdom (although trustees who are not UK resident are also within the scope of the provisions — see below)


    •     for disposals on or after 6 April 2012, more than 25% of the relevant gain that is deemed to accrue4 would be attributed to the participator (on a straight allocation corresponding with the extent of the participator's interest as a participator in the company5). Gains attributable to persons connected with the participator are taken into account in determining whether the 25% limit is exceeded. Where there is more than one participator, the extent of a person's participation is determined on a just and reasonable basis by reference to that person's interests and


    •     for 2013/14 onwards, in the case of a split year (E6.125) for a participator in the company, only

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