Associated companies – corporation tax change

Bryan Elkins - Tax Partner

In December last year draft proposals were put together to eliminate commonly controlled companies as "associates". What does this mean? Practically, if you control a company and your spouse controls a second company, they would have been "associated" for tax purposes. This could have resulted in higher tax payments.   

The chancellor has confirmed that this will not be the case for company accounting periods starting on or after 1 April 2011 (unless there is trading or dependence between the two companies).

Tip:  If your company is currently associated with another in this way, and paying a higher rate of tax because of it, consider changing the accounting year end to 31 March to save tax from 1 April 2011.

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