Hi,
i work in industry and dont really know much about associated companies!
we currently have a number of dorman companies which obviously dont effect the trading company my question is we are thinking about making one of the dormant companies trading again. the thing is it is a non profit company and the income will equal the outgoings.
it will be an associated company to the already trading company as they have same directors and controlling interest.
i am just wondering what effect this will have on the year end corporation tax?
does it then go to marginal tax rate on both companies and if it does am i right in thinking that all the CT will be charged at 24%?
Any help is very much appreciated
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Replies (2)
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The tax rate ...
... will depend on the level of profits. Association does not in itself increase tax rates. What it does is reduce the limit (otherwise £300k) above which marginal rates of tax apply (and at the same time the upper limit - otherwise £1.5m - above which the main rate applies). Each company is considered separately. So one may continue to pay tax at the small company rate whilst the other(s) may pay tax at marginal or main rates.
Looking at it simply in your case, if neither company's taxable profits exceed £150k, the small company rate will continue to apply to both. Profits in excess of £150k and below £750k will be taxed at 25%, and profits in excess of £750k at 24%. eg. taxable profits of £650k - £150k taxed at 20% and £500k taxed at 25%.
The statutory formula for working out the tax payable is quite different, but the above method works in most straightforward situations.Where for instance there are dividends from outside sources the position may be a little more complicated.
The words...
"Non-profit company" and "trading again" don't sit very well with me.
Either there's an intention to manufacture a nil profit, or the company is going to carry on some activity that will be funded, but that probably isn't an adventure in the nature of a trade. If it's not a trade, it may also be that the activity is also not a business, and if it's not carrying on a business, it won't be an asssociated company of the company that is.
The Companies Act concept of dormancy is a different concept from carrying on a business for the purposes of determing associated companies.
If the revived company will be carrying on a business, then I agree with BKD.