What does section 18J of the Corporation Tax Act 2010 do?

Section 18J provides that where a person controls two companies solely through rights or powers held in trust, those rights are disregarded when determining whether the companies are associated. This exclusion only applies if there is no other connection, past or present, between the two companies, including any dealings or transactions.

What conditions must be met for the trustee exclusion under section 18J to apply?

The exclusion requires that there is no other connection between the two companies. The legislation takes a deliberately broad view of connection, including any past or present relationships and any dealings such as trading transactions or loans. If any such link exists or has existed, the exclusion does not apply and normal association rules govern.

How does section 18J affect the small profits rate threshold?

If section 18J applies, the trustee-controlled companies are not treated as associated, so each company can apply the full small profits rate threshold independently without dividing it. However, if any connection exists between the companies, the exclusion fails and the threshold must be shared between the associated companies.

Can past dealings between two trustee-controlled companies prevent the section 18J exclusion?

Yes. Any past dealings between the two companies, such as a sale of equipment or a loan, count as a connection. Even if the dealing occurred years ago, it prevents the section 18J exclusion from applying. The companies would then be treated as associated and must share the small profits rate threshold between them.

Corporation Tax Act 2010 section 18J

Association through a trustee

Section 18J provides that two companies controlled by the same person solely through rights or powers held in trust are not treated as associated with each other, provided there is no other connection between them.

Where a single person controls two companies purely by virtue of rights or powers held in trust, those rights and powers are ignored when deciding whether the companies are associated.
This exclusion only applies if there is no other connection whatsoever between the two companies — past or present.
Any dealings or transactions between the two companies, whether historical or current, count as a connection and would prevent the exclusion from applying.
"Control" carries the same meaning as in section 18E(4), which looks at whether a person has sufficient rights or powers over a company to direct its affairs.

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