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HMRC internal manual

Company Taxation Manual

From
HM Revenue & Customs
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Corporation Tax: small profits relief: control by the same person or persons

CTA10/S25 (4)

More than one person (or group of persons) may have control of a company at the same time. For example, one person may have the greater part of the voting power, while another holds the greater part of the issued share capital and yet a third is entitled to the greater part of the assets in a winding-up For the meaning of control see CTM60210 to CTM60230.

Whether or not two companies are under the control of the same person will appear after applying the control tests in CTA10/S450 and S451 (formerly ICTA88/S416 (2) to (6)) to both companies. However, to determine whether two companies are under the control of the same persons it is necessary to look at which group or groups of persons control each company.

Two companies are only under the control of the same persons if:

  • a group which controls one company is identical with a group which controls the other, and
  • for each company, that group is a ‘minimum controlling combination’.

A ‘minimum controlling combination’ means a group of persons which has control of the company but which would not have control of it if any one of the persons were excluded from the group.

For example, if three unconnected persons, A, B and C, each hold one third of the shares in a company, there are three minimum controlling combinations; A and B together, or B and C together, or A and C together. Control is held by any two together, so the addition of another person to the controlling combination is superfluous - A, B and C together do not form a control group for this purpose.

Example

Company CB

Shares

  • Mr A - 50
  • Mr B - 50
  • Mr C - 50

Total issued shares = 150

 

Company AA

Shares

  • Mr A - 50
  • Mr B - 50
  • Mr C - 50
  • Mr D - 50

Total issued shares = 200

A, B, C and D are not associates.

Company CB is controlled by A and B together, or A and C together, or B and C together, that is by any two of them together.

Company AA is controlled by A, B and C together, or A, B and D together, or A, C and D together, or B, C and D together, that is by any three of them together.

As there is no group of persons controlling Company CB which is identical to a group of persons controlling Company AA, the two companies are not associated.

However if A’s and B’s shares together entitled them to the greater part of the voting power in Company AA, then there would be an identical group controlling both companies, through applying the separate test in CTA10/S450 (3)(b) (formerly ICTA88/S416 (2)(a)), and so the two companies would then be associated.