Jennifer Adams considers the tax implications of companies becoming 'associated'.
It is not unusual for small company directors, their family members, or other business partners to have interests in multiple companies.
However, should any of those companies be deemed as 'associated', those directors may wish to review the current structures and tax strategies of those companies.
The importance of the 'associated companies' rules
For many years, all companies were taxed at a flat rate of 19%; however, Finance Act 2021 changed the rate, such that companies now pay an effective rate of 19% on taxable profits of up to £50,000, 26.5% on profits between £50,000 and £250,000 (under marginal relief), and 25% on profits of £250,000 and over.
Finance Act 2021 also changed how associated
