Definition. Under section 18N of the Corporation Tax Act 2010, a close company is a close investment-holding company unless it exists wholly or mainly for permitted purposes, such as trading. It cannot use the small profits rate.
How it works
This is a UK term. Under section 18N of the Corporation Tax Act 2010, a close company is a close investment-holding company in an accounting period unless, throughout the period, it exists wholly or mainly for one or more permitted purposes. The permitted purposes include carrying on a trade on a commercial basis, making investments in land let commercially, holding shares in and making loans to companies it controls that themselves trade or let land commercially, and co-ordinating the administration of two or more such companies. Holding bitcoin is not on that list.
Section 18A charges the small profits rate only on a company that is not a close investment-holding company, and GOV.UK says such a company cannot claim marginal relief. In practice it pays the main rate on all its taxable profits, including its chargeable gains.
Why it matters for a company
A trading company that holds some bitcoin as part of its treasury still exists mainly for its trade, so the question usually arises when an owner sets up a separate company whose only activity is holding bitcoin. That company does not appear to fit any permitted purpose, so expect it to be treated as a close investment-holding company unless an adviser finds otherwise on the facts. It will also be an associated company of the owner's other companies, which divides the profit limits between them.
Our judgement, not a rule: a separate bitcoin company is not automatically a tax saving. Model the rates, the associated company effect and the cost of running another company before setting one up.
In the US
US rules differ, for example the accumulated earnings tax. See the US section of the holding company guide.
Common mistakes
- Assuming a bitcoin-only company gets the small profits rate.
- Forgetting the associated company rules.
- Moving bitcoin between companies without considering the market value rule for connected persons.
Related
Sources
Primary sources only. Each link was checked on 9 November 2026. Rules change, so confirm the current version with your adviser.
- legislation.gov.ukCorporation Tax Act 2010, section 18N: close investment-holding companies and the permitted purposes
- legislation.gov.ukCorporation Tax Act 2010, section 18A: the small profits rate is not available to a close investment-holding company
- GOV.UKMarginal Relief for Corporation Tax: limits divided by associated companies, and who cannot claim
- legislation.gov.ukCorporation Tax Act 2010, section 18E: associated companies, including control and companies with no trade or business
This is general information and education only. It is not financial, investment, tax, accounting, legal or regulatory advice, and it is not a recommendation to buy, sell or hold bitcoin or any other asset. It does not take account of your circumstances or those of your company. You must obtain your own official professional advice to confirm this information is correct before acting on it.
Rules change. This information is correct to our understanding at the last-reviewed date, but it may be incomplete or out of date, and official sources take precedence. Bitcoin is volatile. A company that buys it could lose some or all of the money it puts in.
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