Associated companies and tax avoidance

The associated companies rules can be an expensive area to overlook. If you're not familiar with them they provide for the corporation tax bands to be reduced depending on whether companies are under common control. This means that if you owned company A and company B rather than each company ceasing to pay the 20% rate of corporation tax at £300,000, each company would be subject to a new limit of £150,000 (which is £300,000/2 companies). So the 32.5% marginal rate would be due if one company had profits of,say £200,000, whereas in the absence of the associated company rules 20% corporation tax would be payable. It's also important to bear in mind that failure to take account of the associated company rules is likely to be classed as a negligent act by the Revenue. This means they'll often look to apply a penalty. The associated company rules though ar emuch wider than the above as you can be attributed the rights of other close family members (eg if your Son owned a company this could be associated with any company you control). See the following article for more information on the scope of the associated companies rules - Associated companies and family members