Glossary · UK
What is Associated Company (Corporation Tax)?
Two companies are associated if one controls the other or both are under common control, which reduces the Corporation Tax profit thresholds proportionally.
Full Definition
For Corporation Tax purposes from 1 April 2023, two companies are associated if one controls the other, or both are under common control (same person or group of persons own more than 50% of the ordinary share capital or can control the majority of voting rights). The significance of associated companies is that the GBP 50,000 lower profits limit (19% small profits rate) and GBP 250,000 upper limit (25% main rate) are divided by the number of associated companies. For example, if a company has one associated company, the effective thresholds become GBP 25,000 and GBP 125,000. Dormant companies with no income and no assets (other than inter-company loans) are excluded. A 51% group company is a subset of associated companies. HMRC Statement of Practice SP 1/2011 provides detailed guidance.