Corporate Tax threshold split equally across companies owned?

[vincetan]

Hi all, I would like to understand how this new corporate tax threshold works, I've been told that if taxable profit is above 50k it will be taxed at 25%.

However, I own 3 limited companies, so the threshold is now 16.6k (50k / 3 companies) and it's taxed at 25%.

Would this be correct?

 

[GLAbusiness]

I am not an accountant. But surely the each of the 3 companies is a separate legal person. So, in my mind it would be £50k per company.

 

[Newchodge]

I am not an accountant. But surely the each of the 3 companies is a separate legal person. So, in my mind it would be £50k per company.

But they are associated companies which can affect the tax position. For example, only 1 can claim employer's NI allowance.

 

[David Griffiths]

I am not an accountant. But surely the each of the 3 companies is a separate legal person. So, in my mind it would be £50k per company.

That's overridden by the fact that they are associated companies, so the thresholds are divided equally among them, if they are all trading,

Dormant companies are ignored. It should be noted that the level of trade is otherwise irrelevant, A company making £500 a year is treated the same as one making £50000

 

[Lisa Thomas]

Hi all, I would like to understand how this new corporate tax threshold works, I've been told that if taxable profit is above 50k it will be taxed at 25%.

However, I own 3 limited companies, so the threshold is now 16.6k (50k / 3 companies) and it's taxed at 25%.

Would this be correct?

Do your companies have an accountant?

 

[vincetan]

all 3 are limited companies and I have controls of them, either owning from 45% (still majority) or 100%.

Yes, each of the companies have an accountant.


So the filing is for 2023/24, and one of the companies' year end, the accountant is now declaring the tax rate as 25% due to the fact that I own 3 companies.

Just wanting to see if this accountant is actually right?

 

[UK Contractor Accountant]

yes, each of the companies have an accountant.

the same Accountant?

Problems arise in practice in actually identifying associates & control where different Accountants are engaged for various company shareholdings.

 

[vincetan]

the same Accountant?

Problems arise in practice in actually identifying associates & control where different Accountants are engaged for various company shareholdings.

They are all different accountants.

But the first one that started it's filing declared my tax as 25% as I've exceeded the 16.6k profit which I feel is odd, but this is my first filing since the new legislation and I thought 25% is for companies making above 250k taxable profit? (this is looking at the hmrc website, the gov website --> government/publications/rates-and-allowances-corporation-tax/rates-and-allowances-corporation-tax) which states that companies with profits over 250k is at 25%.

 

[Lisa Thomas]

I understand you want to check the position, but if you have 3 accountants already, and are unsure about what one of them has advised, ask the other 2. They know the position better than anonymous people on a forum, because they have all your facts and figures.

 

[UK Contractor Accountant]

I thought 25% is for companies making above 250k taxable profit? (

its 19% on the first £50K
then 26.50% on the next £200K
then 25% thereafter

pro-rated of course for associates

back to this nonsense again after a number of years of flat rate of 19%.

 

[MikeJ]

its 19% on the first £50K
then 26.50% on the next £200K
then 25% thereafter

That's not right, is it?

 

[DontAsk]

https://www.gov.uk/government/publi...tion-tax/rates-and-allowances-corporation-tax

"Companies with profits between £50,000 and £250,000 will pay tax at the main rate, reduced by a marginal relief. This provides a gradual increase in the effective Corporation Tax rate."

https://www.tax.service.gov.uk/marginal-relief-calculator

 

[Bobbo]

That's not right, is it?

26.5% is the effective rate on each additional £1 of profit in the 50k - 250k banding. Gradually increases the overall rate of tax paid on total profits from 19% at 50k to 25% at 250k.

 

[UK Contractor Accountant]

When I talk about marginal relief calculation and the 3/200 fraction used in the calculation Directors stare back at me as though I am speaking klingon so i just spell out the 19%, 26.5% and 25% bandings instead.

 

[MikeJ]

Yeah, oddly enough I knew it the other way but I'd not seen it written like that.

 

[vincetan]

what you guys are talking about is for 1 limited company, e.g. between 50k to 250k the effective tax rate will move from 19% to 25%.

However, if you own more than 1 company should that threshold get reduced (divided equally across the number of companies), e.g. if it's 3 then the threshold will be 16.6k to 83.3k?

 

[japancool]

what you guys are talking about is for 1 limited company, e.g. between 50k to 250k the effective tax rate will move from 19% to 25%.

However, if you own more than 1 company should that threshold get reduced (divided equally across the number of companies), e.g. if it's 3 then the threshold will be 16.6k to 83.3k?

Depends on the actual facts.

CTM03570 - Corporation Tax: small profits relief: associated company - definition - HMRC internal manual - GOV.UK

www.gov.uk

 

[Bobbo]

However, if you own more than 1 company should that threshold get reduced (divided equally across the number of companies), e.g. if it's 3 then the threshold will be 16.6k to 83.3k?

Depends on precisely what you mean by "own".

If you are determined to control all three companies then they are considered to be associated as being all under the control of the same person and the thresholds are divided by 3.

Though in one comment you mentioned your shareholding in one company was 45% which does not necessarily mean you control that company unless there are other factors at play.