Corporation Tax Act 2010 section 26

Section 25(3): treatment of certain non-trading companies

Section 26 provides that certain passive non-trading companies can be ignored when counting associated companies for the purposes of determining eligibility for the small profits rate of corporation tax.

• A company that does not carry on a trade or business, has no assets other than shares in subsidiaries, and qualifies as a "passive company" can be disregarded as an associated company.
• A passive company is one that has no significant assets, no income, and no gains — essentially it exists only as a holding structure with no real economic activity of its own.
• If a passive holding company receives dividends from its subsidiaries, it must distribute those dividends in full to qualify for this treatment.
• A company is not treated as having assets simply because it has received, or is entitled to receive, a dividend — so an incoming dividend alone does not disqualify a company from being treated as passive.