Commentary

D1.1206 Associated companies—definition

Corporate tax
Corporate tax | Commentary

D1.1206 Associated companies—definition

Corporate tax | Commentary

D1.1206 Associated companies—definition

The provisions in this article were repealed with effect from 1 April 2015. From this date for non-ring fence trades there is only one 'main rate' of corporation tax (see D1.1201). Where an accounting period straddles this date it is split into two notional periods. For the small profits rate that applies to ring fence trades (see D1.1204).

A company is regarded as an associated company of another if one has control of the other or if both are under the control of the same person or persons1. (Note, the term 'associated company' is not restricted to UK resident companies2).

Clearly, the reference to 'person or persons' ensures that companies are associated companies if they are under common control of individuals or trustees, as well as companies.

Special rules apply in relation to:

  1.  

    •     non-trading companies (see D1.1207)

  2.  

    •     holding companies (see D1.1208); and

  3.  

    •     changing numbers of associated companies throughout an accounting period (see D1.1209)

Definition of control

'Control' is construed in accordance with CTA 2010, s 450 (formerly ICTA 1988, s 416); see D3.1033. The rules are however, relaxed where the companies are controlled by a common4:

  1.  

    •     shareholder, when control derives from fixed-rate preference shares. Such shares are ignored when determining control if the company holding them is not a close company, takes no part in the management of the company and subscribed for the shares in the ordinary course of a business5

  2.  

    •     commercial loan creditor. Loans made between companies that are otherwise completely unconnected are ignored

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