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Company's with directors in common - CT payable?


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18th Jul 2011 18:28

Where is the question?

It is not directors which matter, it is shareholders.  If the same person (perhaps, together with his wife) controls all or the majority of the shares in each company, the companies are associated and the CT rate thresholds are divided by the total number of (non-dormant) companies associated at any time during the accounting period.

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18th Jul 2011 20:05

Could you elaborate for me?

Funnily enough I have a client who is both director and shareholder of two separate companies, both run from the same address - are these deemed to be associated then and, if so, what can/can't they do?

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By Old Greying Accountant
18th Jul 2011 22:22


... if companies are under the same control (I think there are about 9 different tests of this if I remember rightly) the all the CT thresholds are divided by the number of active companies, so if there are 4, the marginal rate of CT will be hit at a profit of £75,000, not £300,000. You therefore have to make sure the records are up to date so that, if appropriate, results can be equalised. 

This leads on to other questions as I would I would be suspicious of this situation: if the companies are making largish profits, may be the owner is seeking to evade CT, if the turnovers are just below the VAT thresholds may be he is seeking to evade VAT, and unless ther is a group VAT registration VAT should be charged on any inter-company trading!

If it is all above board you could ask if one should be made subsidiary of the other, or put a holding company over both, this makes it easier to equalise results, or more importantly claim group relief on losses.


What to me is very very wrong is this:

"The expression 'with one or more of his or her associates' means that a person is treated as owning or, as the case may be, controlling, what any associate owns or controls, even if he or she does not own or control share capital of his or her own."

Which means two companies, one owned 100% by Mr X and the other 100% by Mrs X are associated, even if the two trades are completely unconnected. I can see the point if they are connected as it could be used to evade tax, but if one is a hair-dresser and the other an architect, they are hardly connected!

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18th Jul 2011 22:33

Thanks OGA...

... for the advice.

It's not a CT avoiding exercise, one of the companies is actually losing money... which brings me on to a good point actually.

Company A owes the director about £25k but is losing money, whereas Company B is making fairly good profits - seems a shame to be drawing a salary/taking dividend from B when A owes him so much money.

Is there any way around this?

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By Old Greying Accountant
18th Jul 2011 23:14

They are associated though ...

... so if these "fairly good profits" exceed £150k then it will be in to marginal rates of CT.

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18th Jul 2011 23:53

Haven't the rules of associated companies been loosened in the most recent FA?  Previously companies which were associated due to close family members is now disregarded.

Now only companies with family members are now associated for CT purposes if there is substantial interdependence ? See ESC C9

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By Old Greying Accountant
19th Jul 2011 09:21

Silly me ...

... I checked on the HMRC website, should have realised it was not up to date!

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By Fran001
21st Jul 2011 12:16

Thank you & apology

 It would seem the body of my question was not posted - a web error I have since discovered. So to clarify, the director in question is also a joint shareholder of three companies, one of which is expected to make a profit close to £100k this year. Of the other two, one makes a loss and the other a small profit <£20k.

He was concerned about the CT implications of setting up a fourth company with a third party as we do not wish to tip over in marginal rates. I have since discovered reform rules in current Finance Bill and also ESC C9 and it seems pretty clear as the trades are very closely associated that even being a minorty share holder would mean treatment as associated companies, if I have understood correctly.

Thanks for all the replies, much appreciated, even with such limited info!

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