What you need to know about associated companies
What is an associated company?
A company is an associated company of another company where, if at any time in the preceding 12 months:
- one company has control of the other company
- both companies are under control of the same person or persons
This includes all worldwide companies, regardless of the tax residence of the company.
So, if you set up your first UK company, but you already control a Jersey registered company, they will be associated companies.
When is a company not an associated company?
A company is not treated as associated if:
- it is dormant
- it is a passive holding company (where a company only receives dividends from its subsidiaries and pays these to shareholders, and the company receives no other income or expenses)
- businesses are under common control but the relationship between one or more companies is not one of ‘substantial commercial interdependence’, they will not be deemed as associated
What is control of a company?
To determine control, you will need to look at the shares held by a person and their associates (spouse, civil partner, lineal descendant, ancestor, business partner and sibling) particularly the voting rights attached to those shares, though there can be other factors which come into play.
A company owned by Mr A and a company owned by Mrs A (spouse) may be associated unless it can be demonstrated that there is no substantial commercial interdependence. Examples of substantial commercial interdependence include:
- Financial interdependence – extent of financial support given
- Economic interdependence – companies seek to realise the same economic objective, the activities of one benefit the other, or common customers
- Organisational interdependence – businesses have common management/employees, premises or equipment
What is a ‘minimum controlling combination’?
For companies to be associated companies, there must be the same ‘minimum controlling combination’. For example:
| A Ltd | B Ltd | |
| Mr A | 60% | 35% |
| Mrs B | 25% | 35% |
| Others (unrelated) | 15% | 30% |
Mr A and Mrs B can together control A Ltd and B Ltd. However, Mr A controls A Ltd on his own and is, therefore, the ‘minimum controlling combination’. The minimum controlling combination of B Ltd is Mr A and Mrs B. Since the companies do not have the same minimum controlling combination, they are not related.
The associated company rules add a layer of complexity that needs to be considered based on the fact pattern of any given scenario.
These complex rules can be difficult to establish so it is important to seek advice when necessary.
Corporation tax rates 2026/27
| Profit | Corporation Tax rate |
| Under £50,000 | 19% small profits rate |
| Over £250,000 | 25% main tax rate |
| Between £50,000 and £250,000 | 25% main tax rate less marginal relief |
If a company is associated with one or more companies, the profit bands for determining which corporation tax rate is applicable, and the upper profit limited used in the marginal relief calculation are apportioned by dividing them by the number of associated companies.
Example
For a company whose profits are £80,000, marginal relief would apply and their corporation tax liability is found by multiplying their profits by 25% and then deducting marginal relief.
Marginal relief is calculated by multiplying the threshold for the main tax rate (£250,000 for 2026/27) by 3/200 and then subtracting your taxable profits:
Taxable total profits - £80,000 × 25% (the main rate) = £20,000
Less: marginal relief (3/200 X £250,000 - £80,000) = £2,550
Tax due = £17,450
Where the company is owned by Mr A, who has a controlling interest in another two companies, there are three associated companies. The small profit band and main rate threshold are therefore divided by three:
The small profits banding will be £50,000/3 = £16,667
The main rate profits banding will be £250,000/3 = £83,333
Taxable total profits - £80,000 × 25% (the main rate) = £20,000
Less: marginal relief (3/200 X £83,333 - £80,000) = £50
Tax due = £19,950
Do I need to make quarterly corporation tax payments?
A large company with taxable profits of at least £1.5 million (2026/27) is required to make quarterly corporation tax payments electronically. The large company profit threshold is also divided by the number of associated companies at the end of the last accounting period.
e.g. Mr A has three associated companies, so the large company threshold is £1.5 million / 3 = £500,000.
The company has taxable profits of £80,000 and does not meet the reduced threshold, so will not need to pay corporation tax electronically and quarterly.
What about accelerated instalment payments?
A very large company with taxable profits of at least £20 million is required to make accelerated instalment payments. Again, the profit threshold is divided by the number of associated companies at the end of the last accounting period.
How TaxAssist Accountants can help
TaxAssist Accountants are experienced at working with limited companies. If you’re not sure if the associated company rules affect you speak to our advisers. Call TaxAssist Accountants today on 01226 449554 or use our contact form and we'll be in touch.
Last updated: 22nd July 2026