From 1 April 2023 there will be two rates of corporation tax – 19% for small companies and 25% for large companies.
There are special rules to prevent businesses from taking advantage of the small companies rate by splitting their businesses into lots of small companies. These rules are called the Associated Company rules. To prepare your corporation tax return properly we need to know about any associated companies.
Generally speaking, two companies are associated for tax purposes if one company has control over the other or both companies are controlled by the same person or group of persons. Control can be direct or indirect and can be achieved through ownership of shares, voting rights, or other means.
Control can also be by family members. This mean it’s technically possible for two companies to be associated if Dad owns one company and Daughter owns a different company.
The rules are complicated and so we would encourage our clients to bring to our attention any other companies they or a family member are involved in so we can establish whether the associated company rules apply.