CTM60310 - Close companies: tests: 35% or more voting power held by public
Source: gov.uk (2025-10-22)


CTA10/S446, S447, S448, S449, and S1137

Subject to (a) to (g) below, a company in which 35% or more of the voting power is held by the public is not a close company.

a) General

A company claiming that it is not a close company by virtue of CTA10/S446 has to show that all the following conditions are satisfied at the relevant time.

i) Shares or stock (exclusive of shares etc, entitled to a fixed dividend or entitled to a fixed dividend with a further right to participate in profits) in the company carrying not less than 35% of the total voting power in the company:
- have been allotted unconditionally to or acquired unconditionally by and are deemed to be beneficially held by the public (see (b) below), and
- any such shares, etc, have within the preceding twelve months been the subject of dealings on a recognised stock exchange and have within those twelve months been quoted in the official list of a recognised stock exchange.
ii) The voting power possessed by the principal members (see (d) and (e) below), whether or not the shares are held by the public by virtue of (b) below, does not exceed 85% of the total voting power in the company.

The total voting power for the purpose of (i) and (ii) above is that of all the issued shares or stock including that of shares, etc, entitled to a fixed dividend, etc, which are excluded under (i) above in determining the voting power in the hands of the public.

If the company cannot show that (ii) above is satisfied, the remaining conditions are irrelevant.

b) Shares etc beneficially held by the public

Shares etc, are deemed to be beneficially held by the public, provided that they are not excluded by (c) below, if:

i) they are beneficially held by a company resident in the UK which is not a close company or by a company not resident in the UK which would not be a close company if it were so resident, or

ii) they are held on trust for a registered pension scheme as defined in FA2004/S150 (2), or

iii) they are not comprised in a principal member's holding (see (d) to (f) below),

As regards (i):
- Where the company holding the shares loses its beneficial interest on commencement of winding-up (see CTM36125 (https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm36125)) officers should not normally contend that a company which was not close before the commencement of that winding-up thereby becomes a close company.
- Shares beneficially held by an authorised unit trust (see CTM48200 (https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm48200) onwards) are to be regarded as beneficially held by a company which is not a close company unless five or fewer persons hold more than half of the units issued by the trust. In determining the number of units held by a person, there should be attributed any units held by associates of the person (see CTM60150 (https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm60150)) or by nominees or by any company (or companies) which the person with associates controls.
c) Shares etc not to be regarded as beneficially held by the public

The following shares, etc, are not to be regarded as beneficially held by the public:
- Shares etc, allotted to or acquired by or held by:
i) any director or associate of a director of the company, or

ii) any company which is under the control of any such director or associate or of two or more persons each of whom is such a director or associate, or

iii) any associated company of the company; references to shares held by any person include any shares the rights or powers attached to which could be attributed to that person under CTA10/S451 (4) (nominees - see (a) of CTM60140 (https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm60140) and the final sub-paragraph of CTM60210 (https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm60210)).
- the company, or
- any company within (ii) or (iii) above.
Where a company in (ii) or (iii) above loses its beneficial interest in the shares, etc, on commencement of winding-up (see CTM36125 (https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm36125)) officers should not normally accept that a company which was close before the commencement of that winding-up, thereby ceases to be close.

References to shares held by any person include any shares the rights or powers attached to which could be attributed to that person under CTA10/S451 (4) (nominees - see (a) of CTM60140 (https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm60140) and the final sub-paragraph of CTM60210 (https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm60210)).

d) Principal member

A person is a principal member of a company if:
- where there are five or fewer persons each possessing (see (e) below) more than 5% of the voting power in the company the person is one of those persons,
- the person is one of the five persons who possess the greatest percentages of the voting power, or
- if, because two or more persons possess equal percentages of the voting power, there are no such five persons, the person is one of the six or more persons (so as to include those two or more persons who possess equal percentages) who possess the greatest percentages.
e) Voting power ‘possessed’ by any person

In arriving at the voting power which any person (including a principal member) possesses, there should be attributed to the person any voting power which would be attributed for the purposes of CTA10/S450 (definition of control - see CTM60210 (https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm60210)) CTA10/S450 (5) and (6) (nominees, controlled companies and associates - see CTM60140 (https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm60140) and the final sub-paragraph of CTM60210 (https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm60210)).

f) Principal members holding

A principal member's holding consists of the shares which carry the voting power possessed by the member as defined by (e) above.

For the purpose of (b)(iii) above, shares held in accordance with (b)(i) or (ii) above are deemed to be beneficially held by the public (provided that they are not excluded by (c) above) even if they are comprised in a principal member's holding.

g) Definitions

CTA10/S448(1)

'Associate of a director' has a similar meaning to 'associate of a participator'. See CTM60150 (https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm60150) to CTM60180 (https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm60180) substituting 'director' for 'participator'.

CTA10/S449

A company is to be treated as another's associated company at a given time if at that time or at any time within one year previously:

i) one of the two has control (see CTM60200 (https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm60200) onwards) of the other, or

ii) both are under the control of the same person or persons.

CTA10/S1137

A recognised stock exchange is defined at ITA07/S1005:
- Within the UK, a recognised stock exchange is any market of a recognised investment exchange which has been designated as a recognised stock exchange by HMRC (ITA07/S1005 (1)(a));
- Otherwise, a recognised stock exchange is any market that has been so designated (ITA07/S1005 (1)(b)).
Tables of recognised stock exhanges may be found at 'Recognised stock exchanges: definition, legislation and tables of recognised exchanges' on gov.uk. (https://www.gov.uk/government/publications/recognised-stock-exchanges-definition-legislation-and-tables/recognised-stock-exchanges-definition-legislation-and-tables-of-recognised-exchanges)

Where, in determining whether a company is close at a particular date:
- it is necessary to establish that shares have been the subject of dealings on, and have been quoted in the official list of, a recognised stock exchange, and
- the stock exchange concerned is within the list of designated stock exchanges but that date is prior to the date on which HMRC designated the stock exchange as a 'recognised stock exchange', and
- at the date the close nature has to be established the stock exchange is not ’a recognised stock exchange’, or
- where a company is a close company solely because an overseas stock exchange is regarded as not a recognised stock exchange and liability arises under CTA10/S456,
the case should be submitted to BAI (Technical).