What is an associated company under Corporation Tax Act 2010 section 25?

Under section 25, two companies are associated if one controls the other, or if both are controlled by the same person or persons. The definition of control is based on section 450, which considers shareholdings, voting power, and rights to income or assets, subject to modifications in sections 26 to 30.

How does association for part of an accounting period affect the associated company count?

If a company qualifies as associated for even part of an accounting period, it is treated as associated for the entire period. This means a brief period of association cannot be used to reduce the associated company count, and each company associated at different times counts separately toward the total.

Are dormant companies counted as associated companies under section 25?

No. Companies that have not carried on any business during the relevant accounting period are excluded when counting associated companies. This rule prevents purely dormant shell companies from artificially inflating the associated company count and thereby affecting the applicable corporation tax rate.

How do multiple associated companies at different times affect the corporation tax rate?

If different companies are associated at different times during the same accounting period, each one counts separately even if only one was associated at any single point in time. This can increase the total number of associated companies and potentially raise the corporation tax rate that applies to the company's profits.

Corporation Tax Act 2010 section 25

Associated companies

Section 25 defines what an "associated company" means for the purposes of determining which rate of corporation tax applies to a company's profits under section 24.

A company that is associated for any part of an accounting period is treated as associated for the whole of that period, and multiple companies associated at different times each count separately.
Two companies are considered associated if one controls the other, or if both are under the control of the same person or persons.
Associated companies that carry on no business at all during the relevant period are excluded from the count.
The definition of "control" is based on section 450 of the Act, but is subject to special modifications set out in sections 26 to 30.

Access full legislation.And much more.

By becoming a member, your team gets full access to Tax World research tools and source-backed tax resources.

Become a member