What is a associated company for corporation tax purposes?
Answered 11 March 2026
Associated Company for Corporation Tax Purposes
What the law says
The primary definition of "associated company" for corporation tax purposes (specifically for the small profits rate and marginal relief under CTA 2010, s.25) is as follows:
A company is an "associated company" of another company if:
- one of the two has control of the other, or
- both are under the control of the same person or persons
"Control" for this purpose is defined by reference to the close company provisions at CTA 2010, ss.450 and 451.
Where two companies are associated but the relationship between them is not one of substantial commercial interdependence, associates' rights are not attributed when determining control under s.451(4) and (5) (CTA 2010, s.27, as substituted by FA 2011, s.55).
Note: The definition of "associated company" can vary depending on the specific provision in question. For example, a separate definition applies for the purposes of recovery of unpaid corporation tax (CTA 2010, s.718), where an associated company means one that has control of company Y, is controlled by Y, or is under the control of the same person(s) as Y, at the time of or after a change in ownership.
HMRC guidance / practice
HMRC confirms the general rule as follows:
"A company is an 'associated company' of another company if one of the two has control of the other, or both are under the control of the same person or persons (CTA10/S25(4)). 'Control' for this purpose is defined as for close companies (CTA10/PART10, S450 and S451)."
Key practical points from HMRC:
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Tax residence is irrelevant — a company may be an associated company regardless of where it is tax resident.
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Part-period association counts — an associated company is counted even if it is an associated company for only part of an accounting period.
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Dormant/inactive companies are disregarded — an associated company which has not carried on any trade or business at any time during the accounting period (or the relevant part of it) is disregarded.
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Why it matters — the number of associated companies directly affects the lower limit (£50,000) and upper limit (£250,000) for the small profits rate and marginal relief, as these thresholds are divided by the total number of associated companies (including the company itself).
Citation sources
A company is an 'associated company' of another company if one of the two has control of the other, or both are under the control of the same person or persons (CTA10/S25 (4). 'Control' for this purpose is defined as for close companies (CTA10/PART10, S450 and S451, see CTM60210). A company may be an 'associated company' regardless of where it is tax resident.
Part 2 Income tax, corporation tax and capital gains tax Miscellaneous Companies with small profits: associated companies 55 1 For section 27 of CTA 2010 (meaning of “associated company”: attribution to persons of rights and powers of their partners) substitute— Attribution to persons of rights and powers of their associates 27 1 This section applies if— a it is necessary to determine in accordance with section 25(4) and (5) whether a company is an associated company of another company, and b th
Company C has an accounting period of 1 July 2030 to 30 June 2031, profits of £85,000 and two associated companies for the period to 31 March 2031 and one associated company for the three months to 30 June 2031. The CT main rate and small profits are unchanged at 25% and 19% respectively but the upper limit has been raised to £300,000. Marginal relief fraction The differential between the lower and upper limits has changed so the marginal relief fraction for Financial Year 2031 therefore become
A company is an associated company of another company if one has control of the other, or both are under the control of the same person or persons. "Control" for this purpose has the same meaning as for close companies (CTA10/PART10, S450 and S451, see CTM60210). A company may be an associated company regardless of where it is tax resident. An associated company is counted even if it is an associated company for only part of an accounting period (but see CTM03955 where the accounting period stra
Part 14 Change in company ownership Chapter 6 Recovery of unpaid corporation tax Miscellaneous Meaning of “associated company” 718 1 This section has effect for the purposes of sections 713 and 714. 2 “ Associated company ”, in relation to Y and an assessment to tax, means a company (whenever formed) which, at the time of the assessment or at an earlier time after the change in the ownership of Y— a has control of Y, b is a company of which Y has control, or c is a company under the control of t