HMRC has written about associated companies: what to do

Why HMRC sent the letter, how to check the associated companies count on each return since April 2023, and how to correct or explain it.

Updated 1 November 2026. General guidance, not tax advice.

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Enter a company name or number to see its ownership and likely associated companies.

Between 7 April and 30 September 2026, HMRC wrote to companies whose records suggest they claimed marginal relief without declaring all their associated companies. If you or a client received one of these letters, don't ignore it. HMRC says that if you don't respond, it may open a compliance check.

Why associated companies matter

Since 1 April 2023, a company pays corporation tax at 19% on profits up to £50,000 and 25% on profits over £250,000, with marginal relief in between. Those two limits are shared between the company and its associated companies: they are divided by one plus the number of associated companies, and reduced further for a short accounting period.

For example, a company with two associated companies divides the limits by 3:

lower limit £16,667
upper limit £83,333

A company that left its associated companies off the return will have used limits that were too high, and may have paid too little tax. The count goes in box 326 of the CT600.

What HMRC asks you to do

HMRC's guidance says that if you receive a letter you must:

check all your Company Tax Returns for accounting periods from 1 April 2023 onwards
correct any errors
make a disclosure

If you believe your returns are correct, tell HMRC why.

Step 1: work out the right count for each period

A company is associated with another if one controls the other, or both are controlled by the same person or group of persons. Control generally means more than 50% of the shares, the votes, the rights to income or the rights to assets on a winding up, or otherwise being able to control the company's affairs.

Points that are easy to miss:

Any time in the period counts. A company that was associated for even part of the accounting period counts for the whole period.
Overseas companies count if the control test is met. Where a company is resident doesn't matter.
Groups of people count. If the same two or three people together control two companies, those companies can be associated even though no one person controls either.
Holdings through companies count. What a company you control holds is treated as yours.
Dormant companies are left out if they carried on no trade or business at any time in the period.
Some passive holding companies are left out, but only if they meet strict conditions throughout the period: no trade, only shares in their 51% subsidiaries, and no income other than dividends passed on to their own shareholders.
Relatives' companies only count through a relative's holding where there is substantial commercial interdependence between the companies, for example shared finances, customers, staff or premises.

Work out the count for each accounting period separately: companies are formed, sold and closed, so the number often changes from year to year.

You can check a company to see its owners, the companies linked to them, and a count for the period you choose. Anything the public register can't settle, such as family links, small holdings or what an overseas company does, is listed for you to confirm.

Step 2: correct the returns that were wrong

For each period where the count was too low, recalculate the tax with the correct limits.

Within 12 months of the filing deadline, amend the return through your software, or write to the Corporation Tax office.
After that, HMRC's guidance is to tell it about underpaid tax using the online disclosure service as soon as possible.

Interest runs on tax paid late, so it's better to act promptly. Keep a note of how you worked out each count.

Step 3: if the returns were right, explain why

HMRC's records may link companies that aren't associated: for example, a company that was dormant throughout the period, a shared director with no control, or a company that was sold before the period began. Reply setting out, for each company HMRC might have in mind, why it isn't associated. A short file note with the evidence, such as dormant accounts or the dates a shareholding changed, makes this straightforward.