TaxZone Guide: Accounting for interest from associate companies

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The question of whether a parent company in receipt of interest is carrying on a business and so to be counted as an associate came up again in Any Answers last week like a bad penny.

"Carrying on a business" is a much wider concept than carrying on a trade. The productive management of investments, for instance can amount to a business, whilst it will not amount to trading. As we are talking tax, each case must decided by looking at the facts.

HMRC statement of practice 5/94 says that a non-trading holding company can in certain circumstances be deemed to be not carrying on any business, and can be excluded from the count of associated companies for an accounting period, provided that throughout the period all the following apply:

  • it has no assets other than shares in companies which ar...
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