CTM03945 - Small profits rate: financial year 2023 onwards: associated company definition: exclusions
CTA10/S18F
A company is not treated as an associated company of another company if it carries on the business of making investments and throughout the accounting period it:
- carries on no trade
- has one or more 51% subsidiaries, and
- is a passive company
The meaning of business for the purposes of s18E(3) is considered in CTM03590 and CTM03591.
A company is a passive company for an accounting period if the following conditions are met:
- it has no assets other than shares in companies which are its 51% subsidiaries
- no income arises to it other than dividends
- if it does have dividend income arising to it, they are paid to shareholders (redistribution condition), and those dividends are exempt distributions of a qualifying kind
- no chargeable gains accrue to it in that period
- no management expenses are incurred in respect of the business of making investments
- no qualifying charitable donations are deductible from total profits of the accounting period.
A distribution is an exempt distribution of a qualifying kind if it is:
- a distribution for Corporation Tax purposes because (and only because) it falls within paragraph A, B, G or H in section CTA10/1000(1), and
- it is exempt from the charge to CT for the purposes of CTA 2009
See CTM03915 also.