Readers’ forum: Does the substantial reduction test apply?

Problem child?

I act for a company which is currently owned 50-50 by two individuals Mr A and Ms B. They are not married or in a civil partnership but have lived together for the past ten years or so.

They are now going their separate ways and the plan is that Mr A’s shares will be bought back by the company leaving Ms B as the sole shareholder. All of the conditions for capital treatment seem to be met.

There is however one point which bothers me. A and B have a ten-year old son. When looking at the substantial reduction test A and B are not married/civil partners and so are not associated. But does the son change things?

As he is under 18 he is associated with his mother and his father – does that mean that his parents thereby become associated with each...