Share this content

Is the freeholder company associated for CT?

How the definition of associated company fits with freeholder and leaseholder companies?

Didn't find your answer?

My client is the sole shareholder of two small companies.  One of these companies (Co A) owns a small apartment block and its income derives from renting out the apartments to third parties.  The other company (Co B) owns the land on which the apartment block has been built and thus owns the freeholds of the apartments.  Co B currently charges a peppercorn rent annually to Co A for the use of the freehold.  Are these companies ‘Associated’ for corporation tax purposes?  Co B has a live bank account into which tenants of Co A very occasionally deposit money.  My client is keen not to close this bank account for administrative reasons.  There is an intercompany loan (Co A owes Co B around £80K), which has been in place for many years. 

Replies (5)

Please login or register to join the discussion.

avatar
By The Dullard
11th Sep 2021 17:01

What is it you're actually asking? And why are you asking?

The only remaining definition/relevance of one company being an associated company of another is for the purposes of determining whether a company is a close company for the purposes of CTA 2010, Pt 10, and the definition is in s 449.

Your two companies satisfy the s 449 definition of being an associated company in relation to each other, but that doesn't matter as they are both close companies on the facts provided.

Being under the same control they are also connected with (or related to, for the purposes of the corporate intangibles regime) one another, such that market value applies for the purposes of corporation tax on chargeable gains, amongst other things.

What they are not is fellow 51% group companies for the purposes of payments on account.

Thanks (1)
Replying to The Dullard:
avatar
By Wanderer
11th Sep 2021 18:06

Post 1 April 2023 CT?

Thanks (0)
Replying to Wanderer:
avatar
By The Dullard
12th Sep 2021 12:05

Possibly. Who knows.

Thanks (0)
avatar
By akr129
13th Sep 2021 09:22

I apologise for the lack of clarity in my question. I am seeking to find out whether the receipt of a peppercorn rent as the only income is sufficient for Co B to be 'Active' enough to constitute an associated company. If it isn't active then it is ignored in the post April 2023 CT computation.

Thanks (0)
Replying to akr129:
avatar
By The Dullard
13th Sep 2021 14:30

I'd say that Co B is carrying on a business, albeit one that doesn't actually generate any income, and it doesn't satisfy the requirements of s 18F.

Thanks (1)
Share this content