CTM03945 | Small profits rate: financial year 2023 onwards: associated company definition: exclusions
From HM Revenue & Customs · Company Taxation Manual
A company is not treated as an associated company of another company if it carries on the business of making investments and throughout the accounting period it:
carries on no trade,
has one or more 51 per cent subsidiaries, and
is a passive company.
The meaning of business is considered in and .
A company is a passive company for an accounting period if the following conditions are met:
it has no assets other than shares in companies which are its 51 per cent subsidiaries,
no income arises to it other than dividends,
if it does have dividend income arising to it, they are paid to shareholders (redistribution condition), and those dividends are exempt distributions of a qualifying kindz,
no chargeable gains accrue to it in that period,
no management expenses are incurred in respect of the business of making investments, and
no qualifying charitable donations are deductible from total profits of the accounting period.
A distribution is an exempt distribution of a qualifying kind if it is:
a distribution for Corporation Tax purposes because (and only because) it falls within paragraph A, B, G or H in section , and
it is exempt from the charge to CT for the purposes of .
See also .