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Associated Companies

Associated Companies

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I have just encountered my first potential associated company situation and would be grateful if anyone can confirm my logic - correct or not!

Company 1 - 50%  A and 50% B    (A and B are sisters)

Company 2 - 50% A and 50% C    (A and C are married)

The trade of both is completely different.

I understand that married couples are treated as one but that sisters aren't necessarily if the trade is completely different.

Am I correct in thinking that Company 1 and 2 are not associated because person A is not in fact in control of Company 1.

Thank you

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Nichola Ross Martin
By Nichola Ross Martin
18th Apr 2011 13:48

It depends

Who can control according to the different tests of votes, rights to income, rights to capital? Who has casting vote - that is generally a real decider?

If A in each instance then both are associated.

From 1 April you will only need to attribute rights of associates where there is substantial commercial interdependence between two companies, so if there is and if A controls company 1 by votes (or whatever), then the two could be associated if she can also control company 2 by attributing the rights of her spouse.

Don't overlook loan creditors - can be problematical with family companies.

The new rules make it fantasically complicated. All good fun. I have various guides on this topic on my site. if you are looking to swat up!

Virtual tax support for accountants: www.rossmartin.co.uk

 

 

 

 

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