Do you have associated companies?

Black Country accountants Lewis Smith & Co. are highlighting a new way by which the HMRC (HM Revenue and Customs) are becoming more aggressive in the way they deal with small and medium sized businesses.

The issue is the way the tax man treats the notion of "associated companies". If separate companies are controlled by people HMRC believes are "associated" then the small company corporation tax threshold is reduced pro rata for each company. At one level this sounds fair enough, especially if you have ownership of different companies.

What HMRC are looking to do now, which isn't quite so equitable, is to enforce a definition of what "associated" means that it previously turned a blind eye to. So now HMRC may associate companies if ownership includes a broad range of family members (including spouse, parents and children), business partners, trustees or even beneficiaries of an estate.

Craig Beale, taxation expert at Lewis Smith & Co. sees the situation like this.

"The degree to which HMRC can and will make changes to make this approach stick is only just emerging. As a scare tactic it may result in some companies agreeing with changes in their tax status that are simply unnecessary. We are advising our clients to let us know if they think that there any family or business connections that could impact on their associated company status. Fore-warned is definitely fore-armed at the moment."

If you need expert advice on taxation issues then contact Lewis Smith & Co. today for a free initial consultation.

Lewis Smith & Co. - Accountancy, taxation and business advice for companies in Wombourne, Sedgeley and Kingswinford