TCGA 1992 s.286 – Connected persons: interpretation

(1)Any question whether a person is connected with another shall for the purposes of this Act be determined in accordance with the following subsections of this section (any provision that one person is connected with another being taken to mean that they are connected with one another).

(2)A person is connected with an individual if that person is the individual’s [^F2135spouse or civil partner^F2135] , or is a relative, or the [^F2135spouse or civil partner^F2135] of a relative, of the individual or of the individual’s [^F2135spouse or civil partner^F2135] .

[^F2136 (3)A person, in his capacity as trustee of a settlement, is connected with—

(a)any individual who in relation to the settlement is a settlor,

(b)any person who is connected with such an individual, ^F2137...

(c)any body corporate which is connected with that settlement,

[^F2138 (d)if the settlement is the principal settlement in relation to one or more sub-fund settlements, the trustees of the sub-fund settlements, and

(e)if the settlement is a sub-fund settlement in relation to a principal settlement, the trustees of any other sub-fund settlements in relation to the principal settlement.^F2138]

^F2139 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[^F2140 (3ZA)For the purpose of subsection (3) above—

(a) “settlement” has the same meaning as in section 620 of ITTOIA 2005, and

(b) “trustee”, in relation to a settlement in relation to which there would be no trustees apart from this paragraph, means any person in whom the settled property or its management is for the time being vested. ^F2140]

(3A)For the purpose of subsection (3) above a body corporate is connected with a settlement if—

(a)it is a close company (or only not a close company because it is not resident in the United Kingdom) and the participators include the trustees of the settlement; or

(b)it is controlled (within the meaning of [^F2141 section 1124 of CTA 2010^F2141] ) by a company falling within paragraph (a) above.^F2136]

(4)Except in relation to acquisitions or disposals of partnership assets pursuant to bona fide commercial arrangements, a person is connected with any person with whom he is in partnership, and with the [^F2142spouse or civil partner^F2142] or a relative of any individual with whom he is in partnership.

(5)A company is connected with another company—

(a)if the same person has control of both, or a person has control of one and persons connected with him, or he and persons connected with him, have control of the other, or

(b)if a group of 2 or more persons has control of each company, and the groups either consist of the same persons or could be regarded as consisting of the same persons by treating (in one or more cases) a member of either group as replaced by a person with whom he is connected.

(6)A company is connected with another person, if that person has control of it or if that person and persons connected with him together have control of it.

(7)Any 2 or more persons acting together to secure or exercise control of a company shall be treated in relation to that company as connected with one another and with any person acting on the directions of any of them to secure or exercise control of the company.

(8) In this section “relative” means brother, sister, ancestor or lineal descendant.

Definitions used in section 286 22

connected: (4) Section 1122 of CTA 2010 (meaning of “connected” persons) applies for the purposes of sub-paragraph (1A)(a).
Defined in Sch.7AC para.19(4) · see it in the full Act
the individual: 13C (1) The receipt of the replacement value by the original supplier shall be disregarded for the purposes of paragraph 13B above, as it applies in relation to the shares, to the extent to which that receipt has previously been set (under that paragraph) against any receipts of value which are, in consequence, disregarded for the purposes of paragraph 13 above as that paragraph applies in relation to those shares or any other shares subscribed for by the individual in question (“the individual”).
Defined in Sch.5B para.13C(1) · see it in the full Act
trustee: (7A) In this section, sections 86A to 96 and Schedule 4C “trustee”, in relation to a settlement in relation to which there would be no trustees apart from this subsection, means any person in whom the settled property or its management is for the time being vested (and a person who is treated as a trustee of the settlement by virtue of this subsection shall be treated as a trustee of the settlement for the purposes of section 69).
Defined in s.97(7A) · see it in the full Act
settlement: “settlement” has the meaning given by section 620 of ITTOIA 2005, and
Defined in s.97(7) · see it in the full Act
settlor: 12 The provisions of paragraphs 7 and 8(1), (3), (6) and (7) of Schedule 5 (meaning of “settlor”) apply for the purposes of this Schedule as they apply for the purposes of section 86 .
Defined in Sch.4A para.12 · see it in the full Act
principal settlement: 1 The trustees of a settlement (the “principal settlement”) may elect that a fund or other specified portion of the settled property (the “sub-fund”) be treated, unless the context otherwise requires, as a separate settlement (the “sub-fund settlement”) for the purposes of this Act, and the election shall have effect.
Defined in Sch.4ZA para.1 · see it in the full Act
the principal settlement: (a) applies if the trustees of a settlement (“the principal settlement”) have made an election under paragraph 1 of Schedule 4ZA the effect of which is that one or more other settlements (“sub-fund settlements”) are treated as created, and
Defined in Sch.1C para.8(1) · see it in the full Act
sub-fund settlements: (a) applies if the trustees of a settlement (“the principal settlement”) have made an election under paragraph 1 of Schedule 4ZA the effect of which is that one or more other settlements (“sub-fund settlements”) are treated as created, and
Defined in Sch.1C para.8(1) · see it in the full Act
sub-fund settlement: 1 The trustees of a settlement (the “principal settlement”) may elect that a fund or other specified portion of the settled property (the “sub-fund”) be treated, unless the context otherwise requires, as a separate settlement (the “sub-fund settlement”) for the purposes of this Act, and the election shall have effect.
Defined in Sch.4ZA para.1 · see it in the full Act
ITTOIA 2005: “ITTOIA 2005” means the Income Tax (Trading and Other Income) Act 2005 ;
Defined in s.288(1) · see it in the full Act
settled property: “settled property” and references (however expressed) to property comprised in a settlement shall be construed accordingly .
Defined in s.97(7) · see it in the full Act; In this Act, unless the context otherwise requires, “settled property” means any property held in trust other than property to which section 60 applies (and references, however expressed, to property comprised in a settlement are references to settled property) .
Defined in s.68 · see it in the full Act
close company: “close company” shall be construed in accordance with Chapter 2 of Part 10 of CTA 2010 (see in particular section 439) (subject to section 138ZA (6) ) ;
Defined in s.288(1) · see it in the full Act; (3) Paragraph 46 (meaning of “close company”, “qualifying investor” and “direct or indirect participator”) applies for the purposes of this paragraph but, for the purposes of sub-paragraph (1)(f)(iii), paragraph 46 has effect as if sub-paragraph (3)(c) were omitted .
Defined in Sch.5AAA para.1(3) · see it in the full Act; (6) Paragraph 46 (meaning of “close company”, “qualifying investor” and “direct or indirect participator”) applies for the purposes of sub-paragraph (5).
Defined in Sch.5AAA para.13(6) · see it in the full Act; (7) Paragraph 46 (meaning of “close company”, “qualifying investor” and “direct or indirect participator”) applies for the purposes of sub-paragraph (6).
Defined in Sch.5AAA para.7(7) · see it in the full Act
the residents: (b) if 2 or more of them are then resident ... in the United Kingdom (“the residents”) it shall be treated as being as many equal capital payments as there are residents and each of them shall be treated as receiving one of the payments.
Defined in s.96(4) · see it in the full Act
resident: “resident” means resident in accordance with the statutory residence test in Part 1 of Schedule 45 to the Finance Act 2013 ;
Defined in s.288(1) · see it in the full Act
participator: (9) In this paragraph “participator” has the meaning given by section 454 of CTA 2010 .
Defined in Sch.5 para.8(9) · see it in the full Act; (10) In sub-paragraphs (8) and (9) “participator” has the meaning given by section 454 of CTA 2010 .
Defined in Sch.5 para.2(10) · see it in the full Act; (7) In subsection (4) above “subsidiary” has the meaning given by section 1159 of and Schedule 6 to the Companies Act 2006 and in subsections (5) and (6) above “participator” has the meaning given by section 454 of CTA 2010 , except that it does not include a loan creditor.
Defined in s.239(7) · see it in the full Act
CTA 2010: “CTA 2010” means the Corporation Tax Act 2010 ;
Defined in s.288(1) · see it in the full Act
company: “company” includes any body corporate or unincorporated association but does not include a partnership, and shall be construed in accordance with section 99 ;
Defined in s.288(1) · see it in the full Act; (5) In this paragraph “company” and “group” shall be construed in accordance with section 170(2) to (9).
Defined in Sch.2 para.5(5) · see it in the full Act
assets: (a) the reference to “assets” were a reference to “property”, and
Defined in Sch.4ZA para.22(2) · see it in the full Act
asset: In this sub-paragraph “asset” includes part of an asset.
Defined in Sch.8B para.6(1) · see it in the full Act
arrangements: “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and
Defined in s.16A(2) · see it in the full Act
control: Section 1124 of CTA 2010 (meaning of “control") applies for the purposes of this sub-paragraph.
Defined in Sch.5AA para.4(3) · see it in the full Act; (d) for the purposes of any attribution under section 451(4) (rights of a person's associates to be attributed to the person etc in determining “control”) the rights and powers of a person (“A”) are not to be attributed to another person (“P”) merely because A is a partner of P , and
Defined in Sch.5AAA para.46(2) · see it in the full Act; “control” shall be construed in accordance with sections 450 and 451 of CTA 2010 ;
Defined in s.288(1) · see it in the full Act
group: (5) In this paragraph “company” and “group” shall be construed in accordance with section 170(2) to (9).
Defined in Sch.2 para.5(5) · see it in the full Act

Cases considering section 286 6

Kellogg Brown & Root Holdings (UK) Ltd v HM Revenue and Customs

[2010] EWCA Civ 118 · 24 February 2010Interprets

Provides the connected-person interpretation provisions. The court applied its company-connection rules together with the imported concept of control in section 288(1). (see paras [10], [35]–[46]) Used as a drafting comparison in considering why section 286(5)(b) uses the expression “a group of” and does not also use “together”. (see para [40]) The court interpreted “group” as meaning a collection of persons, without requiring common purpose or concerted action. A group capable of controlling each company can therefore establish connection between the companies. (see paras [35]–[47], [52]–[55]) Used as a drafting comparison because it contains the word “together”, unlike section 286(5)(b). The court did not otherwise determine its scope. (see para [40]) Used as a drafting comparison because it contains the word “together”. The comparison supported the explanation for using “a group of” in section 286(5)(b). (see para [40])

Brian George Foulser & Anor v MacDougall (Officer of HM Revenue & Customs)

[2007] EWCA Civ 8 · 17 January 2007Interprets

Provides the statutory framework for determining whether persons are connected for the purposes of the Act. (see paras [9]; [48]-[55]) Requires questions of connection to be determined in accordance with the following subsections. The wording supports applying section 286(7) in the section 167(2)(b) enquiry. (see paras [9]; [48]; [53]) Cited only. Cited only. Cited only. Cited only. Explains the company-to-company connection provisions as part of the statutory structure, while rejecting any inference that section 286(7) is confined to them. (see paras [51]-[53]) Cited only. Cited only. Explains the company-to-person connection provisions and confirms that section 286(7) may provide a specific connection outside those provisions. (see paras [51]-[53]) Confirms that persons acting together to secure or exercise control of a company are treated as connected in relation to that company. The subsection can establish the connection required by section 167(2)(b) and is not confined to sections 286(5) and (6). (see paras [48]-[64]) Cited only.

Kellogg Brown & Root Holdings (UK) Ltd v Revenue & Customs

[2009] EWHC 584 (Ch) · 24 March 2009Interprets

Interprets “group” as requiring a common relation, such as membership of the relevant companies, but no common purpose. The same shareholder groups controlled each company, satisfying the connected-company test (see paras [24], [36], [47]).

Foulser & Anor v HM Inspector of Taxes[2005] EWHC 2958 (Ch) · 20 December 2005
Barker v Baxendale Walker Solicitors (a firm) & Anor[2017] EWCA Civ 2056 · 8 December 2017
Barker v Baxendale Walker Solicitors (a firm)[2016] EWHC 664 (Ch) · 23 March 2016

What each judgment says about section 286 is in the case-law panel in the full Act.

Amendments and notes

9 notes from legislation.gov.uk

Amendments

F2135Words in s. 286(2) substituted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 121
F2136S. 286(3)(3A) substituted for s. 286(3) (with effect in accordance with s. 74(2) of the amending Act) by Finance Act 1995 (c. 4), Sch. 17 para. 31
F2137Word in s. 286(3)(b) repealed (with effect in accordance with Sch. 12 para. 45 of the amending Act) by Finance Act 2006 (c. 25), Sch. 12 para. 43(a), Sch. 26 Pt. 3(15)
F2138S. 286(3)(d)(e) inserted (with effect in accordance with Sch. 12 para. 45 of the amending Act) by Finance Act 2006 (c. 25), Sch. 12 para. 43(b)
F2139Words in s. 286(3) repealed (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), Sch. 12 para. 25(1)(3), Sch. 26 Pt. 3(15)
F2140S. 286(3ZA) inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), Sch. 12 para. 25(2)(3)
F2141Words in s. 286(3A)(b) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 263 (with Sch. 2)
F2142Words in s. 286(4) substituted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 121

Modifications

C443S. 286 applied by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 312G(6)(c) (as inserted (with effect in accordance with Sch. 37 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 37 para. 5)