Taxes Consolidation Act 1997 section 186

Connected persons

Section 186 defines when a person is considered "connected" with a company for the purposes of the share buyback rules in sections 176 to 183, which determines whether a share repurchase is taxed as a capital gain or as a distribution.

• A person is connected with a company if they directly or indirectly hold or are entitled to acquire more than 30% of its ordinary share capital, its combined share and loan capital, its voting power, or the assets available for distribution to equity holders on a winding up.
• A person is also connected if they have control of the company, meaning the power to ensure the company's affairs are conducted according to their wishes.
• When assessing the 30% threshold, a person is treated as having the rights and powers of their associates (as defined in section 185), and as being entitled to acquire anything they have a future right to acquire.
• A lender who acquired loan capital in the ordinary course of a money-lending business is excluded from the loan capital calculation, provided the lender takes no part in the management or conduct of the company.