Corporation Tax Act 2010 section 34

Close investment-holding companies

Section 34 defines what a close investment-holding company is, which matters because such companies are excluded from the small profits rate of corporation tax.

• A close investment-holding company is any close company that does not exist wholly or mainly for a permitted purpose, such as carrying on a trade or property business.
• The rule is an anti-avoidance measure designed to prevent wealthy individuals from sheltering investment income in a company taxed at a lower rate than their personal marginal rate.
• A company's property letting business does not count as a permitted purpose if the letting is to individuals who have a close connection with the company.
• A company can qualify as having a permitted purpose if it holds investments in, or makes loans to, closely connected qualifying companies — including indirectly through an intermediate company.