Income Tax Act 2007 section 395

Meaning of "associate" in section 394

Section 395 defines who counts as an "associate" of an individual when determining whether that individual has a material interest in a company for the purposes of the interest relief rules in section 394.

• An associate includes the individual's relatives (spouse, civil partner, ancestors, lineal descendants, brothers or sisters), business partners, and certain trustees or personal representatives connected to the individual's shareholdings or obligations in the company
• Trustees of an employee benefit trust are generally not treated as associates merely because the individual is a beneficiary of that trust — this is an important carve-out from the general rule
• The employee benefit trust exception is lost if, at any time after 26 July 1989, the individual (alone or with associates) has beneficially owned or controlled more than 5% of the company's ordinary share capital
• For the purposes of the 5% ownership or control test, interests in the company may be attributed to the individual under the ITEPA 2003 rules on attribution of interests, and "control" follows the close company definition in sections 450 and 451 of CTA 2010