Understanding Connected Persons in UK Taxation: Definitions and Relevant Legislation Links

Who Counts as a Connected Person for Land Transaction Tax

For Welsh Land Transaction Tax, “connected persons” has a specific legal meaning and can affect how a transaction is treated and how much tax is due. It is based on rules in the Corporation Tax Act 2010, so you must check the statutory definition rather than rely on ordinary ideas of family, business, or ownership.

• Individuals can be connected through certain family relationships, including spouses, siblings, ancestors, and descendants.
• Companies may be connected if one controls the other, or if both are under common control.
• An individual can also be connected with a company if they control it for tax purposes.
• Control is not limited to direct ownership; indirect holdings, voting power, and rights attributed from associates may also count.
• A transaction that looks like it is between separate parties may still be treated as connected once the tax rules on control and attribution are applied.
• Working out whether parties are connected can be technical, especially where family members, shareholdings, or company structures overlap.

Scroll down for the full analysis.

Who counts as a connected person for Land Transaction Tax

This page explains what “connected persons” means for Welsh Land Transaction Tax (LTT). This matters because LTT rules often treat transactions between connected people differently from transactions between unconnected parties. Whether people are connected can affect how a transaction is analysed and, in some cases, the amount of tax due.

What this rule is about

The source material is dealing with a defined tax concept rather than an ordinary English phrase. In LTT, a person is not “connected” simply because they know each other or have some commercial relationship. The question is whether they fall within a legal definition.

The Welsh legislation points to UK corporation tax rules for that definition. In particular, the LTT meaning of connected persons depends on section 1122 of the Corporation Tax Act 2010, with related provisions that help explain control, attribution of rights, and associates.

That means the answer may be straightforward in family cases, but much more technical where companies, shareholdings, indirect ownership, or attributed rights are involved.

What the official source says

The official material says that a connected person is, broadly, someone who has a defined connection with the taxpayer.

For individuals, this includes family relationships. The source highlights spouses, siblings, ancestors and descendants as examples of familial ties that can create connection.

For companies, the focus is on control. A company may be connected with another company if one company can exercise control over the other, or if such control can be exercised. An individual may also be connected with a company if that individual can exercise control over it.

The source also makes clear that control is considered both directly and indirectly. So the analysis is not limited to what a person owns or controls in their own name. It may also extend through other entities or through rights attributed under the legislation.

The source points readers to these Corporation Tax Act 2010 provisions:

• section 1122: connected persons
• section 1123: supplementary rules on connected persons
• section 450: control
• section 451: rights to be attributed
• section 448: associate

It also refers to HMRC material on close companies as potentially helpful when working out whether persons are connected or whether one company is under another’s control.

What this means in practice

In practice, the first point is that “connected persons” is a technical gateway concept. If an LTT rule applies only where parties are connected, you cannot answer that by instinct. You need to test the relationship against the statutory definition.

For family transactions, the issue is often easier. Transfers between close relatives may fall within the connected persons rules even if the transaction is informal, at market value, or motivated by family reasons.

For company transactions, the issue is usually whether there is control, and that can be more involved than simply asking who owns more than half the shares. The legislation looks at control in a tax sense, and the source warns that both direct and indirect control must be considered.

This can matter where:

• an individual owns a company through another company
• family members each hold part of the share capital
• rights held by associates are attributed to a person
• control exists through voting power or other rights rather than simple legal ownership

The practical consequence is that a transaction that appears to be between separate parties may still be treated as one between connected persons once the statutory attribution rules are applied.

How to analyse it

A sensible way to approach the question is as follows.

1. Identify who the parties are. Are they individuals, companies, or a mixture of both?
2. If individuals are involved, check whether there is a qualifying family relationship within the statutory connected persons rules.
3. If a company is involved, ask who controls it for tax purposes.
4. Do not stop at direct ownership. Consider indirect holdings and whether rights held by others must be attributed.
5. Check whether any person is an associate for these purposes, because that may affect the control analysis.
6. Only after that decide whether the parties are connected for the LTT rule you are applying.

The key question is not just “who is on the title or share register?” but “who is treated by the legislation as having control or connection?”

Example

Illustration: A parent sells land to a company. On the face of it, the buyer is a company and the seller is an individual, so they may appear to be separate parties. But if the parent controls the company, directly or through rights attributed under the tax rules, the parent and the company may be connected persons for LTT purposes.

Similarly, if two companies enter into a land transaction, they may be connected if one controls the other, or if both are under common control once the statutory rules on attribution are applied.

Why this can be difficult in practice

The source itself signals that this is a complicated area of UK taxation. The difficulty comes from three things.

First, the LTT rule does not contain a self-contained definition. It relies on corporation tax legislation, so readers often need to move between several provisions before they can reach a conclusion.

Second, control is a technical concept. It may depend on voting rights, participator rights, indirect interests, and rights attributed from associates. That means the legal answer may differ from the commercial impression.

Third, family and company relationships can overlap. For example, a company may seem independently owned, but once family attribution rules are considered, an individual may be treated as controlling it.

Because of that, borderline cases usually turn on the exact facts and the detailed statutory rules rather than on broad common-sense impressions.

Key takeaways

• For LTT, “connected persons” is a technical statutory concept, not just an ordinary idea of personal or commercial connection.
• Family relationships can create connection between individuals, and control can create connection involving companies.
• When companies are involved, direct ownership is not the whole story; indirect control and attributed rights may be decisive.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Understanding Connected Persons in UK Taxation: Definitions and Relevant Legislation Links

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