CTM03760 | Corporation Tax: small profits relief: ESC C9
From HM Revenue & Customs · Company Taxation Manual
ESCC9 (for the full text - see ) 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 ),
the companies are controlled by a common shareholder by virtue of fixed rate preference shares (see ), or
the companies are controlled by a common professional trustee, such as a trustee company of a clearing bank (see ).
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 .
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.