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CAA01/S38A and S38B, S51A to S51N

Restrictions relating to companies

There is a restriction to a single AIA in the following cases:-

First restriction: Single company

A single company is entitled to only one AIA - even if it carries on more than one qualifying activity. For example, a company that carries on a trade as well as a property business may have two qualifying activities, but only one AIA, although that AIA may be shared between the two activities in any way the company sees fit.

Second restriction: Group of companies

Companies that fall within the company law definition of a group are legally and economically interdependent and are entitled to a single AIA per group.

Once again, there are no rules about how the AIA may be allocated against the relevant qualifying expenditure incurred by any of the companies in the group - this may be done in any way the companies see fit. However, see the example at the bottom of this page for details of the chargeable periods to which the restriction applies.

Third restriction: Groups of companies under common control

Where two or more groups of companies are 'related'聽and聽controlled by the same person the companies collectively聽are entitled to a single AIA, which may be allocated between them in any way they see fit.

Fourth restriction: Other 鈥榬elated鈥� companies under common control聽

Other related companies under common control are entitled to a single AIA to be allocated between them in any way they see fit.

Meaning of a group of companies

A company is a parent undertaking of another company in a financial year if it is a parent undertaking of that other company at the end of that other company鈥檚 chargeable period ending in that financial year. Parent undertaking is defined in section 1162 of the Companies Act 2006.

Example

Company B draws up its accounts to 31 December each year. In terms of S.1162 of the Companies Act 2006, Company A is Company B's parent undertaking on 31聽December 2023. This means that Company A is Company B's parent undertaking in the financial year ended 31 March 2024.

Meaning of 'control'

• A company is controlled by a person in a financial year if it is controlled by that person at the end of its chargeable period ending in that financial year.
• Similarly, a group of companies is controlled by a person if the parent undertaking is controlled by that person at the end of its chargeable period, ending in that financial year.

CAA01/S574(2) defines 鈥渃ontrol鈥� in relation to a company which is a body corporate. In relation to a company (鈥淐鈥�) which is not a body corporate, control means the power of a person (鈥淧鈥�) to secure (through the holding of shares, voting or other powers) that the affairs of C are conducted in accordance with P鈥檚 wishes.

Meaning of 'related'

A company is related to another company in a financial year if one or both of the shared premises condition聽CA23090, and the similar activities condition CA23090聽are met in that financial year.

A group of companies is related to another group of companies in a financial year聽if in that financial year聽a company which is a member of one group is related to a company which is a member of聽the other group. If in a financial year a group (the first group)聽is related to another group (the second group), the first group is also related to any other group of companies聽to which that second group is related in that financial year.

Allocation of single AIA between companies

For restriction 2 (groups), the single AIA applies in respect of all AIA qualifying expenditure incurred in chargeable periods ending in the financial year in which one company is a parent undertaking of the other or others.

For restrictions 3 and 4, the single AIA applies in respect of all AIA qualifying expenditure incurred in chargeable periods ending in the financial year in which the groups or companies are 鈥榬elated鈥� and under common control.

Example

In the financial year ending 31 March 2024, Company A is a parent undertaking of company B.

Companies A and B have different chargeable periods ending within that financial year:

Company A鈥檚 chargeable period ends on 31 December 2023;

Company B鈥檚 chargeable period ends on 31 March 2024.

Companies A and B are entitled to a single AIA of 拢1 million between them for those chargeable periods. For example, if it is decided that B should claim 拢200,000 for its chargeable period ending 31 March 2024, A will be left with a maximum of 拢800,000 to claim for its chargeable period ending 31 December 2023.