Advice on related parties/associated companies please

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Gem7321
Gem7321 Registered Posts: 1,438 Beyond epic contributor 🧙‍♂️
Hi all

I overheard an interesting discussion today and was just wondering if someone could clarify this for me.

Mr X is director and majority shareholder of Company X
Mr X is opening a new branch of Company X and there will be Company Y trading from the same premises, but Mr X wants Mrs X to be director and majority shareholder of Company Y otherwise 'would be subject to marginal relief' and 'wants to maximise tax efficiency'.

Eh? Surely they will be associated companies as it's husband and wife and trading from the same premises so will still incur marginal relief?

Comments

  • groundy
    groundy Registered Posts: 495 Dedicated contributor 🦉
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    I would say thay are associated.
  • sdv
    sdv Registered Posts: 585 Epic contributor 🐘
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    This is IAS28 Investment in Associate question!

    IAS 28 applies to all investments in which an investor has significant influence but not control or joint control.

    A holding of 20% or more of the voting power (directly or through subsidiaries) will indicate significant influence unless it can be clearly demonstrated otherwise.

    The existence of significant influence by an investor is usually evidenced in one or more of the following ways: [IAS 28.7]

    • representation on the board of directors or equivalent governing body of the investee
    • participation in the policy-making process
    • material transactions between the investor and the investee
    • interchange of managerial personnel
    • provision of essential technical information

    Above information from http://www.iasplus.com/standard/ias28.htm

    From the information you have provided it is difficult to come to any conclusion as to wether the companies are associated or not.

    Just because Husband and wife are major shareholders of different companies, it does not make their individual companies associated, unless the company X (separate legal entity) has a significant influence over company Y (or vice versa).
  • cornflower
    cornflower Registered Posts: 129 Dedicated contributor 🦉
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    I'm not sure it is ISA 28 because that's an accounting standard and I think the OP is asking a tax sort of question. I may be wrong but that's how I have interepreted it.
  • sdv
    sdv Registered Posts: 585 Epic contributor 🐘
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    Oops!

    You are right! Please ignore the above post

    Thanks
  • qwerty
    qwerty Registered Posts: 82 Regular contributor ⭐
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    Husband and wife companies are always associated for tax purposes (even if trading from different premises with different trades).

    Therefore, if two companies are controlled by husband and wife, the corporation tax limits will be halved - you are correct Gem.
  • Dean
    Dean Registered Posts: 646 Epic contributor 🐘
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    Hi Gem

    It won't matter that they are trading from the same premises to determine the associated rules (depending on Company Y's independence). The fact they are husband and wife will...

    http://www.hmrc.gov.uk/manuals/ctmanual/CTM60150.htm

    For 'tax planning' perhaps they want to get divorced?!
  • Gem7321
    Gem7321 Registered Posts: 1,438 Beyond epic contributor 🧙‍♂️
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    That's a fab idea Dean!

    When I overheard it I was so tempted to jump in and correct but thought I'd better check before I make myself sound stupid!

    Thanks for your help everyone.
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