The government has launched a new consultation to simplify the associated company rules for tax.

The associated company rules, can sometimes create some quite baffling results, writes Nichola Ross Martin.

They operate on an entirely mechanical basis and by attributing to various individuals the rights of their associates you can often find that two companies are “controlled” by persons who in actual fact exercise no rights of control at all, or even in extreme cases have no actual or emotional interest in how the business is run.

Happily, HM Treasury, after years of telling all that it was too complicated to reform this area of tax, has now seen the light. It has just launched a new consultation to look at simplifying the rules for small companies. Under its proposals you will no longer need to factor in the rights of an individual’s associates unless there is evidence of the existence of relevant tax planning arrangements which have been put in place to fragment business activities and benefit from a lower rate of tax than would have been otherwise if the whole business had been run as a single entity.

  

Source: HM Treasury consultation - 

Simplification review: the associated company rules as they apply to the small companies’ rate of corporation tax