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Associated companies and your Corporation Tax rate

Last updated: 29 August 2026

Short version. If the person or people who control your company also control other companies, those companies are associated with yours. HMRC divides the £50,000 and £250,000 Corporation Tax limits by the number of associated companies plus one, so a company with one associate is tested against £25,000 and £125,000. In the Tax adjustments section of the return you enter the number of other companies associated with yours (box 326, which is 0 for most companies), and we apply the divided limits and the marginal relief for you. We do not ask you about associated companies anywhere else, and we do not decide for you whether companies are associated: that is a fact you supply and declare.

What counts as associated

Two companies are associated when one controls the other, or when the same person or the same group of people control both (Corporation Tax Act 2010, sections 18E to 18J). Control usually means holding more than half of the shares or voting rights, or having the right to more than half of the income or assets. The most common cases are:

  • A director who wholly owns a consultancy and a separate property company: each has one associated company.
  • Three SPVs owned by the same two shareholders: each has two associated companies.
  • A holding company and its trading subsidiary: each has one associated company.

A company counts if it was associated at any time in the accounting period, even for a single day. There is no pro-rating for part of a period. Companies outside the UK count in the same way as UK companies.

Companies owned by a relative (spouse, civil partner, parent, child, brother or sister) count only where the two businesses are substantially interdependent: shared finance, shared customers or suppliers, shared premises, staff or management. Two companies owned separately by two spouses with nothing in common between the businesses are not associated. HMRC explains the test in CTM03950.

What does not count

  • Your own company. Enter the number of other companies.
  • A company that carried on no trade or business at any time in the period, which is what most dormant companies are (CTM03945).
  • A passive holding company: one with no trade, whose only assets are shares in its subsidiaries and whose only income is dividends it passes on to its shareholders.

If you are not sure whether a company counts, HMRC's guidance at CTM03940 to CTM03955 sets out the rules, and an accountant can confirm the position. We file the number you give us.

How the limits are divided

The small profits limit of £50,000 and the upper limit of £250,000 are each divided by the number of associated companies plus one:

  • No associated companies: £50,000 and £250,000.
  • One: £25,000 and £125,000.
  • Two: £16,667 and £83,333.
  • Four: £10,000 and £50,000.

Both limits are divided by the same number, so marginal relief always exists between them, however many associated companies there are. For an accounting period shorter than 12 months the divided limits are then reduced in proportion to the period's length. Dividends received (other than from 51% group companies) are added to your profits before the limits are applied, exactly as they are for a company with no associates. See dividends received and your rate.

Boxes 326, 327 and 328: which one to use

Box 326 is the number of associated companies for the whole accounting period. It is the box almost everyone uses, and it defaults to 0 in our return.

Boxes 327 and 328 replace box 326 when your accounting period straddles 1 April and either the number of associated companies was different in each financial year, or the Corporation Tax limits changed between the two years (they did on 1 April 2023). Box 327 is the number for the part of the period before 1 April, and box 328 for the part from 1 April. How the two numbers are then applied depends on the period. For a period straddling 1 April 2023(when the limits were introduced) each part is restricted by its own number, as HMRC's manual describes. For a period straddling a later 1 April, HMRC's own calculation applies the higher of the two numbers to the whole period (a company associated at any time in the period counts for the period), and we calculate the same way so that HMRC accepts the return. HMRC accepts box 326 or boxes 327 and 328 together, never all three, so we only offer boxes 327 and 328 when your period actually straddles 1 April, and we will not file a return that completes both forms. In practice: leave box 326 at 0 to use boxes 327 and 328. Once one of them has a figure the other shows a dimmed 0 and files as 0 unless you change it. While box 326 is above 0 the other two boxes will not take a figure, and the other way round, and the reason appears under the box.

A worked example

A company has taxable profits of £40,000 for a full year. On its own it pays 19%, which is £7,600. With one associated company the limits become £25,000 and £125,000, so £40,000 is in the marginal relief band: tax at 25% is £10,000, less marginal relief of 3/200 of (£125,000 minus £40,000), which is £1,275, giving £8,725. With two associated companies the relief shrinks again and the bill is £9,350. The review page and your tax computation show the limits we actually applied so you can check the working.

Quarterly instalments: boxes 630 and 631

HMRC treats a company as large when its profits, including dividends received, are more than £1.5 million divided by the number of associated companies plus one, and very large above £20 million on the same basis. Large and very large companies pay Corporation Tax in quarterly instalments and tick box 630 (large) or box 631 (very large, for accounting periods beginning on or after 1 April 2019) on the return. Because associated companies shrink the threshold, a company with several associates can reach it on modest profits: with three associates it is £375,000. There are exceptions, for example a company that is large for the first time with profits under £10 million, or whose tax bill is under £10,000.

We do not work out whether your company is large. The boxes are yours to tick in the Tax adjustments section, we file what you tick, and we never calculate the instalments, their dates, interest or penalties. If you tick a box, HMRC also asks for the number of associated companies at the end of the previous accounting period (not during this one), which we file in box 326 in place of the ordinary count. HMRC's guidance is at Corporation Tax: paying in instalments.

Periods before April 2023 and box 625

Before 1 April 2023 Corporation Tax was a flat rate with no small profits rate and no marginal relief, so the number of associated companies did not affect the tax, and HMRC's rules do not allow boxes 326 to 328 on a return ending before that date. For those returns we show no associated-company boxes at all: there is nothing to enter.

Before April 2023 the instalment threshold was divided among related 51% group companies rather than associated companies, and an instalment payer entered that count in box 625. Unlike box 326, the box 625 count includes your own company, and HMRC says to leave it blank when there were none. If you tick box 630 or 631 on a return ending on or before 31 March 2023, we offer box 625 and file it as you enter it. For a transition period that starts before 1 April 2023 and ends on or after it, HMRC asks for the 51% group count but files it in box 326, and our return labels the field accordingly.

Periods longer than 12 months

A first accounting period of more than 12 months is filed as two Corporation Tax returns, and HMRC counts associated companies for each return separately. We show one box 326 for each return, each defaulting to 0, and boxes 327 and 328 for whichever return straddles 1 April. We also ask you to say which return any dividends received, chargeable gains and capital losses belong to, because those arise on a particular day and are not spread across the period.

What we check, what we calculate, what we trust you on

  • We check structure only: box 326 with 327/328, an incomplete 327/328 pair, 327/328 on a return that does not straddle 1 April or for an instalment payer, both instalment boxes at once, box 631 before April 2019, box 625 on a return ending after March 2023, and counts that are not whole numbers. Each of these would be rejected by HMRC or could not be calculated, so we tell you at once.
  • We calculate: the divided limits and the marginal relief, applying boxes 327 and 328 the way HMRC does for your period (each part on its own number across 1 April 2023, the higher number for the whole period after that). The review page and the filed computation show the same figures.
  • We trust you on: whether companies are associated, how many there are, whether the company is liable to pay by instalments, and the previous-period counts. Your declaration on the return is that these facts are correct.

Group relief (CT600C), group accounts and consolidation into a parent remain outside what we file. See which company types we support.

Where to enter it

On the Financial data step, under Tax adjustments, the "Associated companies and quarterly instalments" card holds box 326 (default 0), boxes 327 and 328 when your period straddles 1 April, the box 630 and 631 ticks, and the previous-period count or box 625 when a box is ticked. Dividends from 51% group companies go in their own field under Dividends received. Every figure you enter is shown again on the review page with a link back to change it. If a box is in a state HMRC would refuse, the reason appears under it and the Next button stays greyed out until it is fixed, so nothing wrong reaches the review page.

This article is general guidance, not tax advice. The rules are HMRC's: CTM03940 to CTM03955 for the small profits rate, CTM92520 to CTM92800 for instalments, and the Company Tax Return guide for boxes 326 to 328, 625, 630 and 631.