Are our companies associated for Corporation Tax?

How do I determine if our two companies are "associated" for the purposes of Corporation Tax?

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I have been running a limited company for over 20 years, the only shareholders being my wife and me.  We have now restructured the original company so that 66% of the shares are now held by a new limited company (of which my wife and I are the sole shareholders and directors), and the remainder owned by a limited company owned by one of our employees, my wife and me.

Our new company currently only owns the shares and holds cash (and earns bank interest on the cash).  It is going to use the cash to buy an office building shortly.

When completing the Corporation Tax return for the original company, does our new company currently count as an associated company or not?

Also, does this change once the new company buys the office and therefore then owns an asset other than shares, and derives rental income from letting out the office?

Basically, all I am trying to establish is whether I can legitimately continue to use the HMRC Online Filing System for the original company for this year and possibly subsequent years.

Any clarification would be greatly appreciated!

Replies (6)

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By David Ex
03rd Mar 2024 10:15

amlockwood wrote:

How do I determine if our two companies are "associated" for the purposes of Corporation Tax?

You read the relevant legislation and case law.

If you aren’t an accountant, you need to consult one. Perhaps the same one who is advising you on the multiple issues involved in acquiring commercial property and who advised you on employee share ownership matters.

https://find.icaew.com/

Other professional bodies are available.

https://www.accountingweb.co.uk/any-answers/how-to-use-any-answers

“If you intend to plan a course of action based on what you read in here, you should instead be taking professional advice.”

“They are not here to provide free accounting advice.”

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By Truthsayer
04th Mar 2024 09:22

'Any clarification would be greatly appreciated!'

In that case, you can look forward t0 greatly appreciating the clarification of the accountant you should engage.

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By Craigy1874
04th Mar 2024 10:09

Seen this a few times recently and really wish posters would stop recommending accountants for tax advice!

They should be looking for tax advisers, potentially ATT or CTA.

Thats like me saying - you need to consult a tax adviser to prepare your accounts. Just wouldn't happen.

Op, you should take advice and I don't have all the facts however, the companies are unlikely to be connected if the holding company is a holding company. However, once it owns the property and (I presume) starts to rent it out, then they will be connected for tax purposes.

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Replying to Craigy1874:
paddle steamer
By DJKL
04th Mar 2024 10:36

Surely an accountant can also understand and know a fair bit about tax, why else did they stuff tax papers/ exams/questions and issues into the Prelims, Part 1, Part 2 and the TPC (ICAS, no idea what ICAEW did)?

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Replying to DJKL:
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By Craigy1874
04th Mar 2024 11:01

Yes, I am sure they may be able to, but you still wouldn't initially recommend an accountant for a tax question, would you?

Surely if someone needs tax advice, you recommend a tax adviser?

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Replying to Craigy1874:
Stepurhan
By stepurhan
04th Mar 2024 12:09

Craigy1874 wrote:

Yes, I am sure they may be able to, but you still wouldn't initially recommend an accountant for a tax question, would you?

Surely if someone needs tax advice, you recommend a tax adviser?


But the vast majority of accountants are also generalist tax advisers. There are simple compliance mills, but those are the rarity.

Yes, there are specialist areas where a tax adviser is recommended. A sensible accountant will know when a query is too complex, or in an area they are unfamiliar with, and recommend one. This query does not strike me as falling into that category.

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