Corporation Tax

Associated companies and Corporation Tax

How associated companies rules affect your Corporation Tax rate thresholds and quarterly instalment obligations.

UK-wide
Guide summary

If you control multiple companies, check if they are associated. The small profits threshold (£50,000) and upper threshold (£250,000) are split between them. This affects your Corporation Tax rate (19% to 25%).

  • Check if companies are associated (same control)
  • Divide £50,000 small profits threshold by number of companies
  • Divide £250,000 upper threshold by number of companies
  • Pay 19% tax on profits up to small profits threshold
  • Pay 25% tax on profits above upper threshold
  • Marginal relief applies between thresholds (19%-25%)
  • Dormant companies are excluded from the count
  • Quarterly instalment threshold also divided by number of companies
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UK-wide

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What are associated companies

Two companies are associated if one controls the other, or both are under the control of the same person or persons. The associated companies rules were reintroduced from 1 April 2023 alongside the new Corporation Tax rate structure.

Associated companies share the Corporation Tax thresholds. This determines whether you pay the small profits rate (19%), the main rate (25%), or benefit from marginal relief.

The control test

A person controls a company if they hold or are entitled to acquire:

  • More than 50% of the share capital or issued share capital
  • More than 50% of the voting power
  • Rights to more than 50% of distributable income or assets on a winding up

Attribution rules: The rights of a person's associates (spouse, civil partner, minor children, business partners, and certain trustees) are attributed to them when testing control. This means a husband and wife each owning separate companies will typically have associated companies.

How thresholds are shared

The small profits threshold (normally £50,000) and the upper limit (normally £250,000) are divided equally by 1 plus the number of associated companies.

1 company (no associates)
Small profits: £50,000 | Upper limit: £250,000
2 associated companies
Small profits: £25,000 each | Upper limit: £125,000 each
3 associated companies
Small profits: £16,667 each | Upper limit: £83,333 each
5 associated companies
Small profits: £10,000 each | Upper limit: £50,000 each

Common scenarios

Husband and wife companies

A director owns Company A and their spouse owns Company B. Due to spousal attribution, these are associated companies. Each company's small profits threshold is £25,000 instead of £50,000.

Trading company plus property company

A director owns both a trading company and a property company. Both are associated. The thresholds are halved for each company.

Dormant companies

Dormant companies are excluded from the count if they have not carried on a trade or business at any time during the accounting period. A dormant holding company is not automatically excluded.

Quarterly instalment impact

Associated companies also affect the quarterly instalment threshold. The £1.5 million threshold is divided by 1 plus the number of associated companies. With 2 associated companies, the threshold drops to £750,000 each, meaning companies with moderate profits may need to pay Corporation Tax in quarterly instalments.

Associated companies and Corporation Tax (opens in a new tab)

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