Going Into Business With Someone Who Already Controls Other Companies: Here’s How It Can Affect Your Tax Bill July 17, 2026 Kieron McGahan Post in Uncategorized Going Into Business With Someone Who Already Controls Other Companies: Here’s How It Can Affect Your Tax Bill Going into a new venture with someone who already owns other businesses is common — and in most cases, entirely fine from a corporation tax perspective. But the shareholding split you agree at the outset can quietly determine whether their other companies end up affecting yours, long before anyone thinks to check. Two people, two existing businesses, one new venture — a worked example Say you and another director each already run your own 100%-owned company, and you decide to set up a new venture together. If you split the new company 50:50, neither of you individually holds more than 50% of it. Under the associated companies rules, control generally means holding more than 50% of the voting power, or the rights to more than 50% of income or assets on a winding up. A bare 50:50 split doesn't clear that bar for either shareholder on their own — so the new company isn't associated with either of your existing companies, and your two existing companies aren't associated with each other either. Clean. Now change the split to anything other than exactly 50:50 — say 60:40. The 60% shareholder now controls the new company outright. Their existing 100%-owned company becomes associated with it too, because it's the same person controlling both. The new company's profit thresholds are now divided across the whole group they sit in, which reduces the amount taxed at 19%, increases the corporation tax bill, and reduces what's left for after-tax distribution. The 40% shareholder's own company isn't dragged in — they don't have control of the new venture — but they're still sitting in a company whose tax position has just been shaped by their co-shareholder's unrelated business interests. That's worth checking before agreeing a shareholding split on a new venture, not discovering at the first set of accounts. This isn't a new rule The associated companies rules have applied since the reintroduction of the tiered corporation tax system for accounting periods falling on or after 1 April 2023. Anyone running more than one company, or holding shares across more than one, should already have factored this into their tax position. If you haven't, it's worth checking your last two or three years of returns, not just planning ahead from here. The test is control, not the boardroom Whether two companies are "associated" for corporation tax purposes has nothing to do with who sits on either board. It comes down to control — broadly, who holds the voting power, the rights to profits, and the rights to assets on a winding up. It's the same underlying concept Companies House uses for its Person with Significant Control (PSC) register, not a question of directorship. That distinction matters in practice. A professional non-executive director sitting on the boards of three unconnected companies, with no shareholding and no control rights in any of them, is not associated with any of them by virtue of that role. Conversely, someone who holds a controlling shareholding in two companies — appearing on the PSC register for both — is associated with both, whether or not they've ever attended a board meeting for either. HMRC's attribution rules extend this further: control held by a spouse, civil partner, or certain relatives can be attributed to you in working out whether companies are associated, even where the shareholdings look entirely separate on paper. And control isn't always about a straightforward majority shareholding either — voting rights attached to shares, casting votes, and rights held as a loan creditor can all feed into the test, even at a shareholding below 50%. Thresholds are split by number of companies, not by shareholding percentage Once companies are associated, it's a straight division. The £50,000 and £250,000 profit thresholds that determine whether you pay the 19% small profits rate, the 25% main rate, or fall into marginal relief in between, are divided by the number of associated companies — not weighted by how much of each company any individual shareholder owns. Two associated companies means each faces thresholds of £25,000 and £125,000 rather than the full amounts, regardless of whether the controlling shareholding in either is 100% or just above the 50% control line. There's no partial association based on stake size: once control is established, a company is either associated or it isn't. That reduction can pull a company into the marginal relief band, or the full 25% rate, considerably earlier than its own profits alone would suggest. What to actually check If you hold shares in more than one company — regardless of whether you're a director of all of them — it's worth reviewing the PSC position across each, not the board list. That's the register that determines your exposure, and it's been the relevant test for over three years now. And if you're about to agree a shareholding split on a new venture with someone who already controls other companies, it's worth modelling the tax position under a couple of different split scenarios before it's signed off — the difference between 50:50 and 51:49 is not cosmetic. If you're not sure where you stand, get in touch and we'll work through it properly.
Going Into Business With Someone Who Already Controls Other Companies: Here’s How It Can Affect Your Tax Bill Going into a new venture with someone who already owns other businesses is common — and in most cases, entirely fine from a corporation tax perspective. But the shareholding split you agree at the outset can quietly determine whether their other companies end up affecting yours, long before anyone thinks to check. Two people, two existing businesses, one new venture — a worked example Say you and another director each already run your own 100%-owned company, and you decide to set up a new venture together. If you split the new company 50:50, neither of you individually holds more than 50% of it. Under the associated companies rules, control generally means holding more than 50% of the voting power, or the rights to more than 50% of income or assets on a winding up. A bare 50:50 split doesn't clear that bar for either shareholder on their own — so the new company isn't associated with either of your existing companies, and your two existing companies aren't associated with each other either. Clean. Now change the split to anything other than exactly 50:50 — say 60:40. The 60% shareholder now controls the new company outright. Their existing 100%-owned company becomes associated with it too, because it's the same person controlling both. The new company's profit thresholds are now divided across the whole group they sit in, which reduces the amount taxed at 19%, increases the corporation tax bill, and reduces what's left for after-tax distribution. The 40% shareholder's own company isn't dragged in — they don't have control of the new venture — but they're still sitting in a company whose tax position has just been shaped by their co-shareholder's unrelated business interests. That's worth checking before agreeing a shareholding split on a new venture, not discovering at the first set of accounts. This isn't a new rule The associated companies rules have applied since the reintroduction of the tiered corporation tax system for accounting periods falling on or after 1 April 2023. Anyone running more than one company, or holding shares across more than one, should already have factored this into their tax position. If you haven't, it's worth checking your last two or three years of returns, not just planning ahead from here. The test is control, not the boardroom Whether two companies are "associated" for corporation tax purposes has nothing to do with who sits on either board. It comes down to control — broadly, who holds the voting power, the rights to profits, and the rights to assets on a winding up. It's the same underlying concept Companies House uses for its Person with Significant Control (PSC) register, not a question of directorship. That distinction matters in practice. A professional non-executive director sitting on the boards of three unconnected companies, with no shareholding and no control rights in any of them, is not associated with any of them by virtue of that role. Conversely, someone who holds a controlling shareholding in two companies — appearing on the PSC register for both — is associated with both, whether or not they've ever attended a board meeting for either. HMRC's attribution rules extend this further: control held by a spouse, civil partner, or certain relatives can be attributed to you in working out whether companies are associated, even where the shareholdings look entirely separate on paper. And control isn't always about a straightforward majority shareholding either — voting rights attached to shares, casting votes, and rights held as a loan creditor can all feed into the test, even at a shareholding below 50%. Thresholds are split by number of companies, not by shareholding percentage Once companies are associated, it's a straight division. The £50,000 and £250,000 profit thresholds that determine whether you pay the 19% small profits rate, the 25% main rate, or fall into marginal relief in between, are divided by the number of associated companies — not weighted by how much of each company any individual shareholder owns. Two associated companies means each faces thresholds of £25,000 and £125,000 rather than the full amounts, regardless of whether the controlling shareholding in either is 100% or just above the 50% control line. There's no partial association based on stake size: once control is established, a company is either associated or it isn't. That reduction can pull a company into the marginal relief band, or the full 25% rate, considerably earlier than its own profits alone would suggest. What to actually check If you hold shares in more than one company — regardless of whether you're a director of all of them — it's worth reviewing the PSC position across each, not the board list. That's the register that determines your exposure, and it's been the relevant test for over three years now. And if you're about to agree a shareholding split on a new venture with someone who already controls other companies, it's worth modelling the tax position under a couple of different split scenarios before it's signed off — the difference between 50:50 and 51:49 is not cosmetic. If you're not sure where you stand, get in touch and we'll work through it properly.