When is small company associated?

When is small company associated?

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I am told that for Corporation Tax purposes and marginal rate relief totally seperate small trading entities owned seperately 100% by a husband and 100% by a wife respectively are "associated" and therefore only get 50% of marginal rate relief each.

However VAT Notice 733 section 12.5 - 12.8 says - "associated person" is a technical term where the two businesses are closely bound by financial, economic and organisational links.....if a husband and wife are each seperately VAT registered, he as an architect she as an antiques dealer,....then they will not be associated".

So my question to the legal beagles out there is whether the Inland Revenue's definition of "associated person" is different to the VAT people's and also, now they are merged, can you argue for VAT's interpretation?

Ideally I would be like to be pointed at the appropriate tax and VAT law references!
Ebenezer Scrooge

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By nick farrow
11th May 2005 09:48

associated for CT?
A and B are not married or connected persons they each own 50% of C Limited

B also owns 70% (and with his wife 100%) of D Limited.

Will C Limited and D Limited be automatically deemed associated companies for CT purposes?

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By AnonymousUser
11th May 2005 08:21

Can't help on the VAT
but the corporation tax analysis is correct. The relevant bits of the legislation are (all ICTA 1988) s13(4), s416 and s417. It's probably worth mentioning in passing ESC C9 which relaxes the associated company rules for certain relatives but not husbands and wives.

I have had this point come up in the past and had to advise a wife not to incorporate because it would increase her husband's company's tax bill.

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