CTM60055 - Close companies: general: introduction - HMRC internal manual - GOV.UK
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CTM60055 - Close companies: general: introduction
A company controlled by a small group of persons may arrange its affairs to enable those persons to avoid income tax. Legislation to prevent this form of avoidance was first introduced as
long ago as 1922, but since 1965 the counter measures have been provided by the ‘close company’ provisions. These provisions:
define a ‘close’ company, extend the meaning of ‘distributions’ to encompass certain benefits which may be disguised distributions of profit to the shareholders or their families, impose tax
in respect of certain loans made to shareholders, etc, which could in practice represent the extraction of profits without the payment of tax by the shareholders, etc impose certain
restrictions on close companies which are close investment holding companies (CTM60700 onwards). Next page