Corporation Tax Act 2009 section 784

Groups with a relevant connection

Section 784 defines when a "relevant connection" exists between two corporate groups, which is needed for the degrouping charge rules in section 783 to apply where associated companies leave a group at the same time.

• A relevant connection exists between the first group and the second group if, when the transferee company leaves the second group, the principal company of that second group is controlled by the principal company of the first group, or by persons who control (or have controlled) the first group's principal company, or by persons who have controlled intermediate companies in a chain of control leading back to the first group's principal company.
• The test looks not only at the current position but also traces back through the entire period since the transferee left the first group, and applies even where companies in the chain of control have since ceased to exist.
• "Control" follows the close companies definition in sections 450 and 451 of the Corporation Tax Act 2010, which broadly means holding the greater part of a company's share capital, voting power, or rights to income or assets on a winding up.
• A bank carrying on a banking business is not treated as having control of a company solely because it holds rights over loan capital or debt that arose from lending money to the company in the ordinary course of its banking business.