A company currently pays corporation tax at 20 per cent on taxable profits up to £300,000, and at 23 per cent on profits above £1.5 million. Between these figures, the company pays tax at a marginal rate of 23.75 per cent.

If two or more companies are controlled by the same person or group of persons, the amounts above are divided by the total number of companies. So if two companies are associated, they will pay 23 per cent tax on half the threshold, namely at £750,000. This can lead to a significant increase in corporation tax compared with what they would pay if they were not associated.

Before 2011, this could lead to anomalies. A man and a woman who each ran successful businesses could find they both pay much more corporation tax if they marry, even though their businesses were still run independently. That is because their marriage would make the businesses associated. For accounting periods ending 2011, such companies are only regarded as associated of there is some substantial commercial interdependence between them. This interdependence must relate to their financial, economic or organisational relationship.

Loans between companies where the controlling shareholders are connected by marriage or family relationships (parents, children, siblings) will normally lead to the companies being associated, so ownership, financing and operating arrangements may need review as a result of this change.