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HMRC internal manual

Company Taxation Manual

Corporation Tax: small profits relief: attribution of rights and powers of associates - guidance applying to accounting periods ending before 1 April 2011

When deciding if a person or group of persons has control of a company as defined in CTA10/S450, the rights of a person taken into account for this purpose include those of the person’s nominees, together with rights the person is entitled to acquire - see CTM03740.

In addition, when deciding if companies are under the common control of a person or group of persons, and thus associated, in some limited circumstances the rights held in other companies by persons to whom the person or persons are linked as ‘associates’ as defined in CTA10/S448 are also taken into account by virtue of CTA10/S451. The circumstances are those where there is substantial commercial interdependence between the companies concerned.

The substantial commercial interdependence criterion, previously mentioned in a published extra statutory concession (ESCC9), is now set out in legislation with the detailed rules reflected at CTM03780. Subject to this, there are attributed to a person the rights of both

  • associates (see CTM60150), and
  • any companies which the person controls, or the person and associates together control.

All combinations must be tried, including all the possible attributions, some only and no attributions at all; if on any combination a person or group of persons meets the tests in CTA10/S450 they have control. This interpretation was confirmed by the House of Lords in R v Commissioners of Inland Revenue ex parte Newfields Developments Ltd [2001] UKHL 27. The rights of associates’ nominees are included, see above, but not the rights of associates’ associates.

ESCC9 is explained at CTM03760 with the full text at CTM03765. With effect from 1 April 2008 the circumstances where a business partner is treated as an associate for associated companies purposes are limited by statute to those where ‘relevant tax planning arrangements have at any time had effect in relation to the taxpayer company’: ICTA88/S.13 (4) & (4A). Such arrangements must

  • involve both the person whose control position is being reviewed and the business partner, and
  • secure a reduction in corporation tax for the taxpayer company by using the small companies rate provisions.

This provision, added by FA08/S35 (3) has been superseded by the new legislation. See CTM03750.