What is an associated company?

Definition of an associated company

Companies are ‘associated’ if one has control of the other, or if both are under the control of the same person or group of people. 

HMRC defines a person or group of people as being in ‘control’ of a company using several criteria, including if:

  • they have control over the affairs of the company
  • they have control through voting power
  • they have control through share capital or issued share capital
  • they have control over income of the company
  • they have control over assets of the company

If a person, or two or more persons together, satisfy any of the above conditions, HMRC may regard them as having control of the company.

Companies may also be associated if HMRC deems that they are ‘interdependent’. This could happen for several reasons, including:

  • a financial basis (e.g. one company lends money to another)
  • an economic basis (e.g. companies owned by members of the same family regularly work on the same projects for the same customers)
  • an organisational basis (e.g. two companies engage the same employees). 

HMRC will not necessarily associate two businesses just because they are owned by members of the same family or if they operate from the same premises.

For example, if a husband and wife run their own separate companies from different rooms in their family home, these are not likely to be deemed associated companies.

Disclaimer: The content included in this glossary is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this glossary. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.

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