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HMRC internal manual

Company Taxation Manual

From
HM Revenue & Customs
Updated
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Corporation Tax: small profits relief: ESC C9

ESCC9 (for the full text - see CTM03765) applies for the purposes of small companies’ relief.

Broadly, the concession relaxes the rules of association in deciding on common control where:

  • the companies are controlled by a common commercial loan creditor (see CTM03790),
  • the companies are controlled by a common shareholder by virtue of fixed rate preference shares (see CTM03810), or
  • the companies are controlled by a common professional trustee, such as a trustee company of a clearing bank (see CTM03830).

In addition, the concession applies so that, where there is no substantial commercial interdependence between the companies, the attribution of a relative’s rights is limited to those of husbands, wives and minor children. The term ‘substantial commercial interdependence’ as applied under ESCC9 is explained at CTM03770.

Example

Company AM Shares Company A1M Shares
       
Mr A 60 Mrs C 75
Mr B 40 Mr C 25
Total issued shares 100 Total issued shares 100

Mrs C is Mr A’s sister, but neither Mr B nor Mr C is an associate of Mr A.

Mr A controls Company AM and he can be taken to control Company A1M if the rights and powers of his sister, Mrs C, are attributed to him. However, if there is no substantial commercial interdependence between Company AM and Company A1M, Mr A is not treated as having control of the latter company and the two companies are not therefore associated.