Associated companies (from 1 April 2023)

Hi When looking at the new associated company rules from 1 April 2023. I would like to know how many associated companies there are in relation to the below: A Ltd - 100% husband B Ltd - 100% wife C Ltd - 50% husband and 50% wife There is no substantial commercial interdependence between the companies.

Hi,
 

CT is a Self Assessed tax and you will need to decide if the companies are associated or seek professional assistance. Please see our guidance at CTM03570 - Corporation Tax: small profits relief: associated company - definition     and Company Taxation Manual    . Thank you.

My tax advisor thinks they are associated as there is a relationship that says they would vote together according to HMRC guidance at - https://www.gov.uk/hmrc-internal-manuals/corporate-finance-manual/cfm35120 (Relevant extract below) Control by more than one person Following section 6(c) of the Interpretation Act 1978 we accept that the word ‘person’ can include ‘persons’. But such persons will only meet the requirements of the legislation if together they can secure that the company’s affairs are controlled in accordance with their wishes. Whether this exists will be a question of fact in all cases. For example, there could be an oral or written agreement always to vote together, or the intention could be implied by the relationship between the parties. I am not sure and want HMRC's opinion if the 3 companies are associated?

Hi,

I am unable to comment on your specific circumstances without the facts, but in general terms, if one company has control over the other, or both are under the control of the same person or persons then they are likely to be associated. Thank you.

An associated company which has not carried on any trade or business (see CTM03590) at any time during the accounting period is disregarded. If the company only receives interest on deposits is it associated by virtue of carrying out trade or business?

Hi,
 

Thank you for your enquiry . Please review Buiness Income Manual BIM408085 regarding how interest received is reviewed . I trust this answers the question you have . Thank you.

Hi John Dormant companies are excluded when looking at associated companies. A dormant company is basically a company with no activity. In the case of, Jowett v O’Neill and Brennan Construction Ltd [1998] STC 482, a company holding money in a bank deposit account and receiving interest was not an active company and was treated as a dormant company when looking at the associated company rules.