What qualifies as a 'small company' under Corporation Tax Act 2009 section 931S?

A company qualifies as a 'small company' for the purposes of Part 9A if it meets the EU definition of a micro or small enterprise under Commission Recommendation 2003/361/EC. This broadly means fewer than 50 employees and either annual turnover or balance sheet total not exceeding €10 million, assessed per accounting period.

Which financial entities are excluded from 'small company' status under section 931S?

Open-ended investment companies, authorised unit trust schemes, insurance companies, and friendly societies are specifically excluded from being treated as small companies under section 931S, even if they otherwise meet the EU size criteria. The exclusion applies if the company falls into any of these categories at any time during the accounting period.

Why does the 'small company' definition matter for corporation tax on dividends?

The 'small company' definition is important for Part 9A of the Corporation Tax Act 2009, which provides exemptions from corporation tax on certain distributions received by UK companies. Whether a company qualifies as small can determine which specific exemptions are available to it and on what basis those exemptions apply.

Can a company's 'small company' status change from one accounting period to another?

Yes, the EU size test is applied for each accounting period, so a company's status as a small company can change from one period to another. If a company's employee numbers, turnover, or balance sheet total fluctuate across the relevant thresholds, it may qualify in some periods but not others.

Corporation Tax Act 2009 section 931S

Meaning of "small company"

Section 931S defines what qualifies as a "small company" for the purposes of the dividend exemption rules in Part 9A, based on the EU definition of micro and small enterprises, while excluding certain types of financial entity.

A company is a "small company" in an accounting period if it meets the EU definition of a micro or small enterprise under Commission Recommendation 2003/361/EC of 6 May 2003
The EU definition broadly covers enterprises with fewer than 50 employees and either annual turnover or balance sheet total not exceeding €10 million
Certain financial entities are specifically excluded from being treated as small companies, even if they otherwise meet the size criteria: open-ended investment companies, authorised unit trust schemes, insurance companies, and friendly societies
The exclusion of these financial entities applies if the company falls into any of those categories at any time during the accounting period, not just at the period end

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