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HMRC internal manual

Company Taxation Manual

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Corporation Tax: small profits relief: ESC C9 - full text

The full text of the concession is as follows.

ICTA88/S13 (small companies’ relief) and ICTA88/S13AA (CT starting rate) contain rules which apply when one company is associated with one or more other companies. Broadly speaking, one company is associated with another if one of the two has control of the other, or both are under the control of the same person or persons. The rules about control are contained in ICTA88/S416 and ICTA88/S417. The provisions of this concession relate to the application of those rules only for the purpose of Section 13 and S13AA.

The Revenue will not, by concession, treat one company as being under the control of another where the first company is only under the control of the second by taking into account fixed rate preference shares (as defined in ICTA88/SCH28B/PARA13 (6)) which a company possesses. Nor will the Revenue treat one company as associated with another where those companies are only under common control by taking into account fixed rate preference shares that another company possesses. In all cases, this part of the concession applies only when the company possessing the fixed rate preference shares:

  • is not a close company, and
  • takes no part in the management or conduct of the company which issued the shares, or of the business of that company, and
  • subscribed for the shares in the ordinary course of a business carried on by it that includes the provision of finance.

The Revenue will not, by concession, treat one company as being under the control of a loan creditor of that company where there is no past or present connection between the company and the loan creditor other than the loan or loans which cause it to be a loan creditor. Nor will the Revenue treat one company as associated with another where the first company is only associated with the second by being controlled by the same loan creditor provided there is no past or present connection between the companies other than the common loan creditor. In all cases, this part of the concession applies only when the loan creditor:

  • is a company which is not a close company, or
  • is a bona fide commercial loan creditor.

The Revenue will not, by concession, treat one company as being associated with a trustee company (for example, a trustee company of a clearing bank) where the company is only associated with that trustee company because it is under its control by taking into account rights and/or powers the trustee company holds in trust provided there is no past or present connection between the company and the trustee company other than those rights and/or powers. In these circumstances, the Revenue will not, by concession, treat the trustee company as being associated with the other company. Nor will the Revenue treat one company as being associated with another because they are controlled by the same trustee by virtue of rights and/or powers held in trust by that trustee provided there is no past or present connection between the companies other than those rights and/or powers.

The Revenue will, by concession, treat the definition of a relative (in ICTA88/S417 (4)) for the purpose of Section 13 as including only a husband or wife or child who is a minor. This part of the concession applies only in respect of companies where there is no substantial commercial interdependence between them.  
   

The last paragraph of this concession has been superseded by new legislation: see CTM03750.