Do you know who your company is associated with?
Companies pay corporation tax at 20% on the first £300,000, right? Wrong! A company pays at 20% of the first £300,000 divided equally between it and its associates.
Companies are associated where:
· one of the companies has control of the other, or
· both of the companies are under the control of the same person(s).
A person controls a company if he is entitled to >50% of:
· the share capital, or votes;
· the distributions to shareholders;
· the assets on winding up (this includes loan creditors).
The problem is that when looking at control you have to take account of a person’s associates. These are:
· spouse (includes separated, but not divorced) and civil partner
· parents, grand parents and remoter forebear
· brother or sister, including half siblings (but not step, aunts, uncles or cousins)
· partner (as in a business partnership)
· settlements and will trust associates; - trustees are associated where the individual, or any living or dead relative is or was the settler; and where the individual is interested in a settlement, then beneficiaries, remainder men and trustees are associates.
Under self-assessment it is your responsibility to make sure your company pays the right amount of tax.
So – are you sure you know all your company’s associates?
Date: 24th October, 2007
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