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HMRC internal manual

National Insurance Manual

HM Revenue & Customs
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Aggregation of Earnings: Definition of ‘business in association’

The term “business in association” is not defined in either the Social Security Acts or Regulations, nor is there any judicial interpretation of it in the context of NICs liability. Definitions of what is meant by being associated appear in other statutory contexts but they have no relevance outside the legislation in which they appear or into which they have been expressly imported. As a result, we are obliged to construe the words in their context as ordinary English words and to determine how the intention behind Regulation 15(1)(a) of the Social Security (Contributions) Regulations 2001 (SI 2001 No 1004) applies to each case as it arises. The purpose of this particular regulation is to prevent fragmentation of earnings reducing liability to contributions.

“Association” in Regulation 15 (1) derives from the verb “to associate” which has as its primary meaning “to combine for common purpose”. It has a secondary meaning - “have frequent dealings with”, but that would be too wide a meaning in this context. For our purposes, it is the concept of combining or uniting towards a common end.

Points to consider

Under the Income and Corporation Taxes Act 1970 the question of whether companies form a “group” or are “associated” for the purposes of sections 272 and 302 hinges on the shareholding and common directorship. “Business in association”, for the purposes of Regulation 15, however, depends on the actual relationship of the companies. We cannot, therefore, merely use the shareholding as a yardstick.

To satisfy the condition companies must have some degree of common purpose, substantiated by the sharing of facilities, personnel, accommodation, customers, and so on. All these elements need not be present in a particular case but the greater the interdependence, the greater the likelihood of treating the companies as being in association. Companies may therefore be treated as being in association with one another where they share profits or losses or to a significant degree, resources. The sharing of profits or losses would be taken to mean that the companies’ relationship should be such that the fortunes of one would be reflected in those of the other(s). Consequently, where two companies share expenses, for example, for staff, premises, and so on, this would tend to affect profits or losses of both.

The fact that two companies associate together for mutual aid, or that one or more directors are common to each, does not, of itself, cause those companies to be carrying on business in association with each other. If, however, two or more companies agree to carry on together a definite business project, say, one to manufacture goods and the other to sell them, all sharing in agreed proportion the overall costs and profits, the companies would then be regarded as carrying on business in association. Conversely, if one company manufactures goods and sells them to other companies which, in turn, markets them, each charging for and making its own profits, the businesses would not be regarded as being in association with each other.

To sum up, therefore, in each case it is an overall consideration of the businesses’ relationships that is required. However, in carrying out such a consideration, the importance to be attached to the various factors will vary, and it is therefore not possible to provide a straightforward set of tests which will lead to a clear-cut decision in every case.


Two companies share office facilities and have common directors, Company Secretary, and wages clerk. Is this enough or is further information needed?

The sharing of office facilities, common directors, and a common Company Secretary and wages clerk are far from decisive if there are no financial links between the companies. If they were decisive, any companies with common facilities would be trading in association.

You need to address questions to establish facts. Some of those questions include

  • Do the companies carry on separate trades and have separate employees?
  • Is there any inter-reliance and is the profit and loss of one company affected by the other?
  • Do they have separate bank accounts, sales invoices and are they separately registered for VAT?
  • Do they have different customers and trade independently?

It will also be helpful to know about the arrangements for the payment of the rent of the shared office facilities and the payment of rates, heating, lighting, and so on. In addition, we would want to know whether the (common) Company Secretary and wages clerk have a separate contract of service with each company, or just with one of them. It will be significant if the common employees have a contract of service with just one of the companies, and there is no inter-company billing for work done for the company with whom there is no contract of service.

NIMAppendix3 (Word 21KB) shows a list of questions which can be asked to help decide whether two or more employers are carrying on business in association.