CIOT: Proposals to simplify associated companies rules welcomed
The Chartered Institute of Taxation (CIOT) has welcomed the announcement that complex corporation tax rules on associated companies will be replaced with a new, simpler test based on 51% group membership in April 2015.
Stephen Coleclough, President of the CIOT, said:
“Following its decision to reduce the main rate of corporation tax to 20% from April 2015, I am pleased that the Government has also taken the opportunity to announce it plans to reform the complicated rules on associated companies.
“The current associated company rules are intricate, have been the subject of many amendments and consultations in recent years and have some unfair applications in certain cases. Applying the rules in practice can be problematic and time-consuming. The merging of the main and small profits rates of corporation tax has provided an excellent opportunity to simplify this part of the corporation tax system, which I am pleased to see the Government has taken.
“We look forward to seeing further details of this announcement in the draft Finance Bill clauses.”
Notes for editors
1. It has previously been announced (in Finance Act 2013) that the main rate of corporation tax will be reduced to 20% from 1 April 2015, meaning that from that date, both the main rate and the small profits rate of corporation tax will be the same.
2. A single rate of corporation tax means that legislation in Part 3 of Corporation Tax Act 2010 (CTA 2010) concerning the definition of associated companies becomes largely redundant. A definition of an associated company will still be required for the purposes of large companies instalment payments regulations and for those companies involved in oil extraction activities (for whom the reduction in the main rate to 20% does not apply).
3. Under the current rules in s.25 CTA 2010, a company is an associated company of another company at any time when one of the two has control of the other or both are under the control of the same person(s).
4. The Chartered Institute of Taxation
The Chartered Institute of Taxation (CIOT) is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.
The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.
The CIOT’s 17,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.
George Crozier
External Relations Manager
D: +44 (0)20 7340 0569
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