The definition of a connected persons for tax purposes can be complex and varies depending on the circumstances.
Section 839 of the Income and the Corporation Taxes Act (ICTA) 1988 sets out a statutory definition of “connected persons” for tax purposes.
The general situation in Section 839(2) of ICTA 1988 states:
Section 839(8) of ICTA 1988 states that, in this context, “‘relative’ means brother, sister, ancestor or lineal descendant.” Married partners are connected with each other.
The term ‘relative’ does not cover all family relationships. In particular it does not include nephews, nieces, uncles and aunts.
The definition of these people extends for Inheritance Tax to include the individual’s uncle/aunt, nephew/nieces, and their spouse, spouse’s uncle/aunt, and spouse’s nephew and niece.
There are further categories of connected the persons in respect of the trustees, acquisitions and disposals of partnership assets and in relation to companies.
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