It could be time to close those unnecessary limited companies House - New Associated Company Rules

Consider the possibility of closing unnecessary limited companies, in light of the New Associated Company Rules introduced by HMRC.

As of April 2023, there has been an upward adjustment in corporation tax rates for profits exceeding £50,000 per year. The rate escalates to 25% for profits over £250,000. For your convenience, you can access our free calculator here https://www.spondoo.co.uk/corporation-tax-calculator-post-april-2023.

As part of this tax rate increment, HMRC has implemented rules for companies under the control of the same individuals. These rules stipulate that the £50,000 and £250,000 thresholds mentioned earlier are to be shared among all associated companies when calculating the corporation tax liability. Consequently, if you possess multiple companies categorised as associated, the corporation tax limits for each company will be reduced, requiring you to pay taxes earlier.

Some of the test to determine if you have associated companies include:

• Financial interdependence - Do the companies extend loans to each other?
• Economic interdependence - Do the companies share clients or rely on each other's economic activities?
• Organizational interdependence - Do the companies share equipment, employees or premises?

It is crucial to note that foreign controlled companies can also fall under the scope of associated company rules.

If you possess more than one company, it would be prudent to discuss the implications of this with us.

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