Jennifer Adams considers the tax implications should employers be 'connected'.
Several tax implications can arise due to the relationship between the companies, particularly affecting corporation tax, VAT, group relief, and transfer pricing, as well as having an impact on the PAYE employment allowance (EA).
EA reduces an employer's National Insurance contributions (NICs) liability by up to £5,000 per tax year. Importantly, no claim can be made by sole director companies where the director is the only employee. An employer can claim less than the maximum if this covers their total Class 1 NICs bill.
The allowance is only available to employers with employer NICs liabilities of under £100,000 in the previous tax year.
Connected companies
A 'connected company' generally refers to companies with a
