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Do these companies need to share the Aia?

Do these two companies constitute a group for Aia purposes

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If there are two limited companies which are owned by the same four shareholders do these two companies have to share the available Annual Investment Allowance? The owners own 25% of the shares in each company. The two companies are involved in the same trade but operate from different sites. Thank you. 

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By Matrix
09th Mar 2018 20:40

Surely we should be coming to you with these questions if you are capital allowances experts!

Only single AIA available as under common control and similar activities.

https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca23090

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By Ruddles
to Matrix
09th Mar 2018 21:15

You might want to re-consider your answer.

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By Matrix
to Ruddles
09th Mar 2018 21:48

So they are not under common control?

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By Ruddles
to Matrix
09th Mar 2018 22:07

Not according to my (and others’) reading of the legislation. It refers throughout to person (not ‘person or persons’)

It is true that the IA70 says that ‘person’ includes ‘persons’ but, in the case of loan relationships, it took HMRC some time to officially concede that the singular can include the plural - but only in certain cases. There is no corresponding provision in their AIA guidance (which I concede proves absolutely nothing but nevertheless I would argue that their use of the singular throughout is telling).

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By plummy1
to Ruddles
10th Mar 2018 16:18

Yes this is the point where I got stuck. The legislation only referring to person not persons in terms of "common control". However my gut instinct is telling me that HMRC, if asked, would extend that to persons especially where all four shareholders are the same. Would you in these circumstances advise the client that it is acceptable to claim AIA for each company but that it could be challenged by HMRC?

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By Ruddles
to plummy1
10th Mar 2018 16:49

Yes. And I might be minded to add a note on the CT comps.

The problem in your particular case is that while A, B and C vote to control Co1, A, B and D might vote to control Co2. There is no reference anywhere to the concept of common irreducible groups being identified, as there used to be with associated companies.

There is also a slight problem with the explanatory notes. Although they refer mostly to the singular (and in the one example they cite they refer to control by the same individual) on one occasion they do add “(or persons)”

So until HMRC make their position clear I’d be advising clients that there is sufficient doubt and make the full claim.

I’d also suggest that there is sufficient uncertainty to warrant a non-statutory clearance if you were so minded.

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By plummy1
to Ruddles
10th Mar 2018 16:59

Thank you for taking the time to respond. Your guidance is much appreciated.

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By plummy1
to Matrix
09th Mar 2018 23:56

I'm sorry. Do you say to every accountant who asks a question "surely we should be coming to you as an accountant to answer this question? "As you can see from the responses below the legislation is not entirely clear otherwise I wouldn't have asked the question.

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By Matrix
to plummy1
10th Mar 2018 06:44

It would have been helpful if you had added where you had got to on this yourself.

I read your question too quickly and did not see the 4 shareholders so please go with Ruddles response.

You asked whether they were in a group and the answer is No but the question should have been are they under common control.

If you are setting up this structure to avail of AIA for both companies then you may be overlooking the usual benefits of being in a group. For example if the AIA creates losses in one of the companies there will be no group relief. Obviously if they were in a group there would only be one AIA but there may be other benefits of being in a group which should be compared to whether they get single or double AIA.

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