What is an Associate Company ? in relation to corporation tax
- Aamer Amin
- Jun 26
- 2 min read
An associate company is:
A company under the control of the same person or group of persons as another company.
Or, one that controls or is controlled by another company (directly or indirectly).
"Control" typically means owning more than 50% of the share capital, voting rights, or entitlement to income or assets on winding up.
In the UK, associate companies play a key role in calculating corporation tax, particularly for determining the applicable tax rate bands and limits for marginal relief.
Why Associate Companies Matter for Corporation Tax
As of 1 April 2023, the UK has two corporation tax rates:
19% for companies with profits ≤ £50,000 (small profits rate)
25% for companies with profits ≥ £250,000
Marginal Relief applies for profits between £50,001 and £250,000
These thresholds are divided by the number of active associate companies.
Impact of Associate Companies on Tax Bands
Number of Active Companies (Including Your Own) | Small Profits Threshold | Upper Profits Threshold |
1 | £50,000 | £250,000 |
2 | £25,000 | £125,000 |
3 | £16,667 | £83,333 |
4 | £12,500 | £62,500 |
5 | £10,000 | £50,000 |
So, if you have 4 associated companies, your main company would only benefit from the small profits rate if its profits are under £12,500, and would pay the full 25% if profits exceed £62,500.
Practical Examples
Example 1: No associate companies
Company A profits: £80,000
Falls in marginal relief range (£50k–£250k): eligible for partial relief
Example 2: 3 associate companies (4 companies total)
Thresholds are £12,500 (small profits) and £62,500 (full rate)
Company A profits: £80,000 → above upper limit → taxed at 25%
What You Should Do
Identify all associated companies, including dormant ones (unless they’ve never traded).
Report these in your tax computations.
Apply reduced thresholds when determining if you qualify for small profits rate or marginal relief.
For further guidance and advise contact Amin & Co Accountants (Accountant Manchester) or call at 0161 224 3510
E&OE
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