Annoyed associates

23 May 2007

Issue: 4109 / Categories: Forum & Feedback

I have several cases where HMRC have challenged a small company's claim to corporation tax at 19%, on the basis that the company is associated (via the controlling director) to companies under the control of his numerous (over 100), but unknown, partners in film or information technology limited liability partnerships. Although the director takes no interest in the day-to-day running of the LLP, it has been taxed as trading income/losses.

The Inspector is saying that unless the director can confirm the number of associates the company must withdraw the claim to 19% corporation tax and be liable at 30%! This is grossly unfair and not what the associated company anti-avoidance rules intended.
Can Taxation readers provide any help and guidance as to whether this can be successfully disputed and how best to proceed?
Query — T17 011 — Film Fan.

Reply by J.G.:

I am not sure whether the associated company rules were or were not designed to catch these sorts of arrangements. However as we are told with the new targeted anti-avoidance rules even though they are drafted widely we can expect HMRC to apply them with sense and sensibility. Therefore if HMRC are applying the rules in the case of film partnerships we can only accept that it is correct to treat all...

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