Two companies are associated for Corporation Tax if one controls the other or both are controlled by the same person or group of people. The £50,000 and £250,000 rate limits are shared equally between a company and its associated companies.
Why it matters
The lower and upper limits that decide a company’s Corporation Tax rate are divided by the number of associated companies plus one. A company with one associated company has limits of £25,000 and £125,000, so it reaches the 25% main rate at half the usual level of profit. The £1.5 million threshold for paying by instalments is divided in the same way.
Which companies count
- A company counts if it was associated at any time in the accounting period, even for a single day.
- Companies anywhere in the world count, not just UK ones.
- A company that carried on no trade or business at any time in the period, such as a dormant company, is ignored.
- Companies controlled by relatives or business partners can count where there is substantial commercial interdependence between them.
On the return
The number of associated companies goes in box 326 of the CT600. Tax Optimiser uses it to work out the limits and any marginal relief.
Read more: Marginal relief on the CT600.