Introduction to Close Companies

Question 1

What are close companies?

Answer 1

Broadly small companies that are subject to special tax treatment

Question 2

What is a close company?

Answer 2

A company under the control of:

1) Five or fewer participators
2) Any number of participators who are also directors

Question 3

What is a participator in relation to close companies?

Answer 3

A person having a share or interest in capital or income

Question 4

What does control mean in relation to close companies?

Answer 4

Shares of more than 50% or greater part of assets

Question 5

What are exclusions to close companies?

Answer 5

• Shares quoted on recognised stock exchange
• Controlled by one or more non-close companies

Question 6

What is the general rule on close companies for loans?

Answer 6

All loans from close company to participants are subject to tax

Question 7

What if close company is a money lending business?

Answer 7

Then they don’t pay tax

Question 8

What if a close company makes a loan to an employee?

Answer 8

Taxable only if they have material interest (5%+ share)