Presented By: Presented To: Topic Roll No# Semester Class Subject

Hassan Ijaz Sir Imran Khalid Group s’ of Companies BSAF 12114 4th hhhh BS(Accounting & Finance) Business Taxation jjjj


Contents of Presentation Associated companies & implications of being associated Criteria for group relief group Criteria for capital gains group Factors affecting choice of group relief 2 .

is resident overseas.'s shareholding in Cello Ltd was disposed of on 31 December 2012. The other shareholdings were all held throughout the year ended 31 March 2013. 100% Flute Ltd 100% Music plc. It holds more than 50% Music plc. Echo Inc. The other companies are all resident in the UK 3 .Associated companies & implications of being associated A company is an 'associated company' of another company if one of the two has control or both are under the control of the same person or persons. and the shareholding in Drum Ltd was acquired on 1 January 2013. has the following shareholdings: Shareholding Alto Ltd 25% Bass Ltd 60% Cello Ltd 100% Drum Ltd 100% Echo Inc.

Implications of being associated All the companies are trading companies except for Flute Ltd which is dormant. and they are all trading companies  For associated company purposes.  Alto Ltd and Flute Ltd are not associated companies as Music Ltd has a Shareholding of less than 50% in Alto Ltd. count as associated companies for the whole of the period. are associated companies as Music Ltd has a shareholding of over 50% in each case. 4 . Drum Ltd and Echo Inc. such as Cello Ltd and Drum Ltd. Cello Ltd. it does not matter where a company is resident. and Flute Ltd is dormant. Echo Inc.  Companies that are only associated for part of an accounting period. is therefore included despite being resident overseas.  Bass Ltd.

There are four associated companies in the group Corporation tax rate limits are as follows: Upper limit:£1500000/4=£375000 Lower limit: £300000/4=75000 5 .Implications of being associated Only one annual investment allowance (maximum £ 25000 p.a) is available for the group.

all four companies are part of a 75% group for group relief purposes.Sub 2.Criteria for group relief group If two companies are members of 75% group relief group where:  One company is a 75% Subsidiaries of the others both companies are 75% subsidiaries of a third company. Sub 3 and therefore. 6 . Example The following information relates to the Tin ltd group: Tin ltd 75% sub 1 75% sub 2 75% sub 3 Answer to example Tin ltd has a 75% direct holding in Sub 1.

 I ltd and J ltd cannot from a separate gains group as I ltd is part of the G ltd gains group and cannot therefore be itself a parent company and form a separate gains group.Criteria for capital gains group If capital gains group criteria of parent company its 75% subsidiaries of first subsidiaries and so on. 7 .H ltd and I ltd are in gains group as there is 75% ownership at each level and G ltd (the parent ) owns more than 50%(75%×75%=56.25%)in I ltd.19%) and therefore J ltd does not form part of the gains group. Gains group  G ltd .  G ltd does not own more than 50% of J ltd (75%×75%×75%=42.

 The amount surrendered should be sufficient to bring the claimant company’s augmented profits down to the small profits rate limit. Group relief should therefore be surrendered as follows:  Initially to companies subject to corporation tax at the marginal rate of 25%.Factors affecting choice of group relief The most important factor to be taken into account when considering group relief claims is the rate of corporation tax payable by the claimant companies. 8 .  Any remaining loss should be surrendered to those companies subject to corporation tax at the small profits rate of 20%.  Surrender should then be to those companies subject to the main rate of corporation tax of 24%.

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