Toggle sidebar

Associated companies

Sort by date Sort by votes
Red Wood

Red Wood

Free Member
Jan 14, 2014
851
118
London
Company A ltd and company b ltd have the same directors and share commercial facilities and machinery, however the products sold by each company although similar are not interchangeable and sold to different sectors within construction.

As an example, imagine one specialised in hammers, the other is axes. Technically both tools but used in very different environments.

Will the associated company rules affect CT position?
 
Red Wood said:
Company A ltd and company b ltd have the same directors and share commercial facilities and machinery, however the products sold by each company although similar are not interchangeable and sold to different sectors within construction.

As an example, imagine one specialised in hammers, the other is axes. Technically both tools but used in very different environments.

Will the associated company rules affect CT position?
Click to expand...
Seem associated to me, you need to consider the VAT position as well if neither or only one is registered.
 
  • Like
Reactions: Red Wood
Upvote 0
associated companies are those under common control by virtue of shareholdings not directorships. However without delving into it on Google I could stand to be corrected.
 
Upvote 0
Associated Companies can be complex and we need to know more of the facts.

The HMRC manuals are from CTM03710 and associates CTM60150

Can’t post links but the ACCA have this.

accaglobal.com/uk/en/technical-activities/uk-tech/in-practice/2022/april/how-changes-corporation-tax-impact-associated-companies.html
 
  • Like
Reactions: Red Wood
Upvote 0
Gyumri said:
can you dig up the reference on the HMRC manual as I don't have time to check. I wouldn't think it applies to common directors.
Click to expand...
Any opinion on whether we changed it to one director had control of comp A, the other of Comp B respectively.

Both directors are related (family)

The one thing we cant change is the shared facilities. Comp A holds the lease, comp B uses some of the warehouse space.
 
Upvote 0
Rawlinson Pryde said:
Can’t post links but the ACCA have this.

accaglobal.com/uk/en/technical-activities/uk-tech/in-practice/2022/april/how-changes-corporation-tax-impact-associated-companies.html
Click to expand...
That's a good link. I note:

"The control test is concerned solely with the shareholders’ ‘share’ power or voting power. Control by directors or management is irrelevant."

However, the OP should read the details as that's were the devil likes to hide.
 
  • Like
Reactions: Red Wood
Upvote 0
Rawlinson Pryde said:
Associated Companies can be complex and we need to know more of the facts.

The HMRC manuals are from CTM03710 and associates CTM60150

Can’t post links but the ACCA have this.

accaglobal.com/uk/en/technical-activities/uk-tech/in-practice/2022/april/how-changes-corporation-tax-impact-associated-companies.html
Click to expand...

I am not intelligent enoigh to come out with a rock solid opinion of our position based on the link.

UK tax law is overcomplicated.
 
Upvote 0
I don't mean to hijack the thread and can if required start a new one.
Would a company be classed as associated if 2 companies have same director/s but operating from different premises in different activity and financially independant.
 
Upvote 0
clamp1988 said:
I don't mean to hijack the thread and can if required start a new one.
Would a company be classed as associated if 2 companies have same director/s but operating from different premises in different activity and financially independant.
Click to expand...
Who are the shareholders of each company?
 
Upvote 0
However, provisions with the legislation permit a disregard of companies under the control of associates, provided that there is no “substantial commercial interdependence” (SCI) between the companies concerned (s18G CTA 2010).

SCI is defined for these purposes by reference to the existing definitions given in the Employers Allowance legislation (para 3, Schedule 1 National Insurance Contributions Act 2014) and focuses on the extent of the following factors between the companies:

Financial interdependence – direct or indirect financial support between the companies.

Economic interdependence – companies would be ‘economically interdependent’ if (in particular) they seek to realise the same economic objective, the activities of one benefit the other, or they have common customers.

Organisational interdependence – this will be the case where the businesses of the companies have common management/employees, common premises, or common equipment.
 
  • Like
Reactions: Gyumri
Upvote 0
UK Contractor Accountant said:
IMO they are associated but the association is disregarded as on the face of it seems that there is no substantial commercial interdependence.
Click to expand...
In my opinion if both companies have no financial dependance, from a different industry sector, not sharing any resources and do not trade between themselves in any way to avoid paying tax or VAT, then they can't be associated.
 
Upvote 0
clamp1988 said:
In my opinion if both companies have no financial dependance, from a different industry sector, not sharing any resources and do not trade between themselves in any way to avoid paying tax or VAT, then they can't be associated.
Click to expand...
But
Red Wood said:
Company A ltd and company b ltd have the same directors and share commercial facilities and machinery, however the products sold by each company although similar are not interchangeable and sold to different sectors within construction.
Click to expand...

That sounds associated to me.
 
Upvote 0
UK Contractor Accountant said:
The Association rule is to stop profit shifting from one company to one or more other companies so as to avoid the higher ctax rate of 25% as apposed to19%.
Click to expand...
That's why I further went to qualify about the tax in #18. in that instance would a director be right in putting/leaving the bit of associated companies in CT returns blank (0) or would he still insert 1
 
Upvote 0
Interesting thread....

In terms of interdependence between 2 companies with some significant crossover into the same market but offering completely different products/services, i.e., online CRM database and physical products.
Could utilizing the contacts of the software company to promote the physical products of the other be seen as interdependence? The relationship is not essential but useful when dealing with long term customers who's filters (online and personal) would likely ignore contact from the newer company. The software company currently charges the products one a nominal fee for promotion/advertising but way below market rates.
 
Upvote 0
This thread will probably be pinned as it may have more information/clarity than the HMRC website, only if my post #24 gets a definitive answer:).
 
Upvote 0
clamp1988 said:
This thread will probably be pinned as it may have more information/clarity than the HMRC website, only if my post #24 gets a definitive answer:).
Click to expand...
Unfortunately you might only get a definitive answer, which you can rely on, from a qualified accountant or tax adviser if you pay for the advice. No one who is qualified to give an opinion will do so for free, otherwise he/she might have problems with PI insurance should that advice be wrong or open to challenge.
 
Upvote 0
clamp1988 said:
That's why I further went to qualify about the tax in #18. in that instance would a director be right in putting/leaving the bit of associated companies in CT returns blank (0) or would he still insert 1
Click to expand...
What is the level of tax at stake?

HMRC have always stated that the existence of associated companies is relevant only in cases where the amount of tax at risk is significant
 
Upvote 0
I had 2 companies.

Same director, same shareholder, working from same premises, same equipment, same broadband, phone, etc.

Doing different things, neither VAT registered, never even considered they were associated.

I closed 1 business down which had a £3,000 loss in accounts.

My accounted passed on that loss to my other company using associated companies as a reason.
 
Upvote 0
Well, I'm in a similar position:

I have a business which is VAT reg'd and is basically IT contracting, owned 50/50 with my spouse.

I would like to set up another entity for a software product that I'm considering trying to make a go of (because I want a limited-liability protection, and not to VAT register until it makes some actual money - which it may well never do. Different customers, no financial dealings between each).

That ACCA link (accaglobal.com/uk/en/technical-activities/uk-tech/in-practice/2022/april/how-changes-corporation-tax-impact-associated-companies.html) mentions interdependence, but only if it's "Where businesses are owned by associates of that person (or persons), "

I.E: if it's owned by your partner and isn't significantly financially interdependent.

My reading is then it both my example and #1 _are_ associated companies.
 
Upvote 0
You must log in or register to reply here.

Latest Articles

Top Bottom
Back