Glossary · UK
What is Associated Company (for Corporation Tax)?
For corporation tax, companies are associated if one controls the other or both are under common control. The GBP 50,000 and GBP 250,000 profit thresholds are divided equally between associated companies.
Full Definition
Two companies are associated for Corporation Tax purposes if one controls the other, or if both are controlled by the same person or persons acting together. Control is broadly defined as owning more than 50% of the ordinary share capital, possessing more than 50% of the voting rights, or being entitled to more than 50% of distributable income or assets on winding up. The practical consequence is that the profit thresholds for the small profits rate and main rate of Corporation Tax are divided by the total number of associated companies (including the company itself). For 2026/27 the thresholds are GBP 50,000 (19% small profits rate) and GBP 250,000 (25% main rate). A company with two associates (three companies total) would have effective thresholds of GBP 16,667 and GBP 83,333. Dormant companies with no income and no assets other than inter-company loans are excluded from the count. Passive investment holding companies with no control relationship and no substantial commercial interdependence can also be excluded in some circumstances under HMRC Statement of Practice SP 3/2006. The associated company rules interact with the Marginal Relief calculation, which also scales proportionally. Planning consideration: creating or acquiring additional active subsidiaries shrinks the thresholds automatically and can push a profitable company into the 25% rate band earlier than expected.