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Getting up close

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15 June 2010
Issue: 4259 / Categories: Forum & Feedback
A close company rented a property to a partnership consisting of the company’s shareholders. The company was deemed to be a close investment holding company. The company subsequently acquired more properties and most of its rental income is now from other tenants

Our client is a limited company with two shareholders A and B each owning 50% of the issued share capital.

The company rents a property to a professional partnership and originally A and B were the only equity partners of this each having a 50% share.

The limited company was deemed to be a close investment holding company (CIHC) and the higher rate of corporation tax was payable on its profits because the rental income was received from a connected party.

Some years later the limited company purchased further property for rental purposes. The rent received from the partnership still exceeded 50% of the total rent being received from all properties and we were advised that the company would still be deemed to be a CIHC on the basis that more than 50% of the rental income was received from a connected party.

The situation has...

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