Associated Company & Change of Year End

Associated Company & Change of Year End

Didn't find your answer?

The situation is as follows:

- Two associated companies - one of which we are dealing with and preparing accounts for with a year end of 30 Sept;
- Profits average at around £200k per annum and therefore subject to tax at the main rate less marginal relief;
- Looking forward, the companies will cease to be associated 6 months into the next accounting period i.e. 31 March 2013;
- As I understand it, the companies are associated for the purposes of dividing the small profits band for the year ending 30 September 2013 (due to the companies being associated a some point in that accounting period);
- My Question is - can we change the date to which we prepare the accounts (which has never been changed) to say 31 March 2013 or 30 April 2013 with the profits in this 6 or 7 month period being subject to the main rate (adjusted for the shorter period and divided by 2), and then go forward with the profits in the next year to 31 March 2014/30 April 2014 being able to benefit from all being taxed at the small profits rate;
- In summary, is it possible to change the year end in the period in which companies cease to be associated in order to expediate the benefit of utilising the full small companies band of £300k?

Thanks in advance

Replies (5)

Please login or register to join the discussion.

avatar
By User deleted
20th Nov 2012 10:21

Simple tax planning

Yes, of course you can do that

Thanks (1)
avatar
By bus1ptk
20th Nov 2012 10:27

Thanks for the response.

 

I was just unsure by having a shorter accounting period, whether or not the the companies would deem to be associated for purposes of splitting the small profits band as they would have been associated at some point in the previous 12 months?

Thanks (0)
avatar
By User deleted
20th Nov 2012 10:42

Nope, you're fine

Companies are associated for an accounting period, however short, only if they are associated at some point during that accounting period. All other periods, before and after, are irrelevant.

Thanks (0)
avatar
By bus1ptk
20th Nov 2012 11:16

One last question......

Just to clarify.....the two companies are set up as:

Company A - Director 1 has 50% shares / Director 2 has 50% shares

Company B - Director 1 from above having 100% of shares

 

The previous accountants stated that the companies are associated on the grounds that Director 1 is the managing director and therefore has the final say on decisions and as a result both company A and B are under common control. 

 

Does that sound right?

Thanks (0)
avatar
By User deleted
20th Nov 2012 11:36

Depends on the documenation

Is there, for example, a shareholder agreement giving Director 1 the casting vote? If not, I would argue that the companies are not associated - 'control' needs to be considered at particpator/general meeting level, not administrative/board level. Just because he has the main say in the day-to-day running of the company that does not give Director 1 control for associated company purposes.

Thanks (0)