What makes companies associated
HMRC’s test is short: a company is associated with another if one controls the other, or both are controlled by the same person or group of people (CTM03940). Control has the meaning used for close companies. Broadly, it means having, or being entitled to acquire, more than half of the shares, the voting power, the income or the assets on a winding up.
Some common examples:
- a parent company and its subsidiary
- two companies that are both more than half owned by you
- two companies controlled by the same group of people, such as the same three shareholders
Where a company is based doesn’t matter: a company resident abroad can still be associated with yours.
Relatives and business partners
When working out who controls a company, shares held by a person’s associates, such as a spouse, other relatives or business partners, can be added to their own. Since 1 April 2023, those associates’ rights are only added in if there is substantial commercial interdependence between the two companies (CTM03950).
Substantial commercial interdependence looks at financial, economic and organisational links between the companies. They don’t need all three: a strong financial link alone can be enough. So two unconnected businesses run by a married couple are not usually associated, but two companies that share premises, staff and customers may well be.
Companies you leave out
An associated company that hasn’t carried on any trade or business at any time in the accounting period is disregarded (CTM03945). That covers dormant companies. A passive holding company is also left out: broadly, one whose only assets are shares in its 51% subsidiaries, which passes on any dividends it receives and claims no tax deductions for its costs.
On the company tax return, the number goes in box 326 of the CT600. It counts companies associated with yours at any time in the period, not your own company and not the disregarded ones.
When in the period it counts
A company counts as associated if it was associated with yours for any part of the accounting period, even a single day (CTM03955 has the exceptions). So a company bought or set up in month eleven still cuts the limits for the whole year.
What it does to the tax
Both limits are divided by one plus the number of associated companies:
| Associated companies | Lower limit | Upper limit |
|---|---|---|
| 0 | £50,000 | £250,000 |
| 1 | £25,000 | £125,000 |
| 2 | £16,666.67 | £83,333.33 |
| 3 | £12,500 | £62,500 |
For example, a company with £80,000 of profit and one associated company in 2026/27 is above its £25,000 lower limit and below its £125,000 upper limit. It pays 25% (£20,000) less marginal relief of £675, so £19,325. With no associated company it would pay £17,450: £20,000 less marginal relief of £2,550.
Association also affects the thresholds for paying in instalments: the £1.5 million and £20 million profit limits are divided in the same way. See payment and filing dates.