Nichola Ross Martin's Tax Consultancy

For accounting periods ending on or after 1 April 2011 see Associated companies checklist (new)

Is the company a Close Investment Holding Company?
If "Yes", then the company is taxed at the main rate of Corporation Tax.

Who controls the company is terms of:

• Voting power
• Number of ordinary shares
• Right to income (excluding loan creditors)
• Right to capital on winding up

Does a loan creditor control the company?

ESC C9: a loan creditor is not treated as controlling the company if:

• There is no past or present connection between them and
• The loan company is not a close company, or
• It is a bona fide loan creditor (e.g. a bank/financial institution/private equity)

If more than one person can control the company (using any of the tests above):

• Work out the minimum controlling combination (known as the "irreducible group") of individuals required to excercise control.

Step1:

Work out which individuals are associated with each other.

An individual's associates are:

• Spouse or civil partner
• Blood relatives*
• Business partners**
• The beneficiary of a trust will be an associate of the trustees.
• The settlor of a trust will be an associate of beneficiaries and trustees.

* if there is no commercial interdependence between companies, associated blood relatives will only include minor children per ESC C9 

**Companies controlled by business partners are not associated providing that there are no relevant tax planning arrangements.

Step 2:

• For each individual, attribute the rights of each of their associates for each of the control tests above. 
• Do not attribute the rights of associates' associates.
• Consider the affect of ESC C9 when attributing rights of relatives and partners.

Step 3:

• Identify which companies are controlled by the same individual or irreducible group of individuals.

Step 4:

• Exclude any companies which are dormant.
• Include foreign companies.
• Exclude companies controlled by business partners, or blood relatives (excluding minor children) if there is no commercial interdependence between their companies and yours: per ESC C9. Do not exclude if there are tax planning arrangements in place.

Step 5:

• Work out which controlling combination controls the greatest number of companies.

Step 6:

• Enter number of associated companies on each company's tax return

New rules
For associated companies:

For accounting periods ending on or after 1 April 2011 see Associated companies checklist (new)

Need help?
Detailed guidance and examples are provided in these Practical Tax Guides:

• Close companies and control
• Associated company tests

Contact the Virtual Tax Partner Support service