Direct Tax Acts, Finance Act 2018

430 Meaning of “close company
CTA76 s94; FA03 s63; FA04 s89 and Sch3; FA07 s35 and Sch2

(1) For the purposes of the Corporation Tax Acts, “close company” means a company under the control of 5 or fewer participators, or of participators who are directors, but does not include –

(a) a company not resident in the State,

(b) a registered industrial and provident society, being a society within the meaning of section 698,

(c) a building society within the meaning of section 702,

(d) a company controlled by or on behalf of the State and not otherwise a close company,[…]1

[(da) a company controlled by or on behalf of –

(i) a Member State of the European Communities (other than the State) or,

(ii) the government of a territory, with which government, arrangements having the force of law by virtue of [section 826(1)]3 have been made,

and which company is not otherwise a close company, or]2

(e) a company within subsection (4) or section 431.

(2) For the purposes of this section –

(a) a company shall be treated as controlled by or on behalf of the State only if it is under the control of the State, or of persons acting on behalf of the State, independently of any other person, and

(b) where a company is so controlled, it shall not be treated as being otherwise a close company unless it can be treated as a close company by virtue of being under the control of persons acting independently of the State.

[(2A) For the purposes of this section –

(a) a company shall be treated as controlled by or on behalf of a Member State of the European Communities (other than the State) or the government of a territory with which arrangements having the force of law by virtue of [section 826(1)]3 have been made only if it is under the control of that Member State or the government of that territory, or of persons acting on behalf of that Member State or the government of that territory, independently of any other person, and

(b) where a company is so controlled, it shall not be treated as being otherwise a close company unless it can be treated as a close company by virtue of being under the control of persons acting independently of that Member State or the government of that territory.]4

(3) A company resident in the State (but not within paragraph (b) or (c) of subsection (1)) shall also be a close company if, on a full distribution of its distributable income, more than 50 per cent of that income would be paid directly or indirectly to 5 or fewer participators, or to participators who are directors.

(4) A company shall not be treated as a close company –

(a) if –

(i) it is controlled by a company which is not a close company, or by 2 or more companies none of which is a close company, and

(ii) it cannot be treated as a close company except by taking as one of the 5 or fewer participators requisite for its being so treated a company which is not a close company,

or

(b) if it cannot be treated as a close company except by virtue of paragraph (c) of section 432(2) and would not be a close company if the reference in that paragraph to participators did not include loan creditors who are companies other than close companies.

(5) References in subsection (4) to a close company shall be treated as including a company which if resident in the State would be a close company.

(6) Where shares in any company (in this subsection referred to as “the first company”) are at any time after the 5th day of April, 1976, held on trust for an exempt approved scheme (within the meaning of Chapter 1 of Part 30), then, unless the scheme is established wholly or mainly for the benefit of persons who are, or are dependants of, employees or directors or past employees or directors of –

(a) the first company,

(b) an associated company of the first company,

(c) a company under the control of any director, or associate of a director, of the first company or of 2 or more persons each of whom is such a director or associate, or

(d) a close company,

the persons holding the shares shall for the purposes of subsection (4) be deemed to be the beneficial owners of the shares and in that capacity to be a company which is not a close company.

Go to Revenue Guidance Notes on TCA

Amendments

1 Deleted by FA03 s63 (punctuation change)

3 Substituted by FA07 s35 and Sch2 with effect as on and from the date of passing of FA07 – 2 April 2007

2,4 Inserted by FA03 s63

Corresponding UK Tax Provision

Formerly Section 414, Income and Corporation Taxes Act 1988. Now re-enacted at various places in the Corporation Tax Act 2010. Refer to the Destination Table of that Act for details.

Sections referred to in text

section 431 [Certain companies with quoted shares not to be close companies]

section 432 [Meaning of “associated company” and “control”]

section 698 [Interpretation (Chapter 1 – Industrial and provident societies)]

section 702 [Union or amalgamation of, transfer of engagement between, societies]

section 826 [Agreements for relief from double taxation]

Cross references

4 Interpretation of Corporation Tax Acts

5 Interpretation of Capital Gains Tax Acts

10 Connected persons

131 Bonus issues following repayment of share capital

132 Matters to be treated or not treated as repayments of share capital

438 Loans to participators, etc

488 Interpretation

705B Conditions for notice under section 705E

783 Interpretation and general (Chapter 2)

808 Power to obtain information

817 Schemes to avoid liability to tax under Schedule F

835O Corresponding chargeable profits in the State

Sch 12A Approved Savings-Related Share Option Schemes