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Associated company?

Associated company?

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Company A owns 49% of company B.  Unconnected party holds 50% in company B with the son of company A directors holding other 1%.  Company A has also made substantial loan to company B.  With a 31 March 2011 year end, HMRC are insisting that the companies are associated.  Is there any way out that anyone can think of or is it a case of admitting HMRC are correct?

Any answers appreciated.

Replies (4)

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By johngroganjga
30th May 2013 08:46

On what basis do HMRC say that A and B are associated?  What is the issue?

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By Steve Kesby
30th May 2013 11:20

If A...

... would (by virtue of the loan and its shareholding) be entitled to receive the greater part of the [gross] assets available for distribution amongst the creditors and the members on a winding up, A and B would be associated.

For the purposes of the small companies rate (and POAs), etc. if the companies are associated for any part of an accounting period, they're treated as associated for the whole of the accounting period.

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By Rammstein
30th May 2013 15:16

Thanks Steve, that is as I thought.  John, it will affect the small companies rate and the CT paid.

Cheers for both of your time.

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Replying to andy.partridge:
By johngroganjga
30th May 2013 16:03

Misunderstood ...

Rammstein wrote:

John, it will affect the small companies rate and the CT paid.

I think you misunderstood what I meant when I said "what is the issue?"

I am well aware of the consequences for the calculation of a company's CT liabilities of the number of associated companies it has.

My question was what was the point in HMRC's case that you were not sure whether to accept.  It sounds as though the point was that HMRC were saying that the companies were associated by virtue of the entitlement of one to more than 50% of the gross assets of the other, notwithstanding the lack of voting control.  If that was the issue you have had the answer from Steve, which I agree with.

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