Business Tax: Large company, Group issues

As companies and groups grow, additional tax considerations can come into play.  If these are missed, unnecessary tax, interest and potentially penalties can arise.  

Tax considerations can be split for this purpose into three headings:

A number of UK tax rules include a ‘size’ criteria which mean that they only apply to certain ‘size’ companies or groups. Therefore the ‘size’ of a company or group is very important and will determine whether or not these rules need to be considered.

The ‘size’ of a company/group can impact something as simple as the date that a company/group is required to pay its corporation tax.   In the UK there are currently three different payment regimes that a company/group can fall into depending on their ‘size’. A company may be required to pay their tax in quarterly instalments during the accounting period or 9 months after the year end – this can not only have big cash flow implications but getting it wrong will result in HMRC raising interest on late payments. Specifically in this area, in order to determine the size, it is not just the number of companies with a group, but also the number of associated companies (e.g. connected via common control) it has.

Many of the UK rules with an anti-avoidance purpose only apply when a company/group reaches a certain size, for example the UK transfer pricing rules (although there are certain exceptions) and the diverted profits tax. Transfer pricing is becoming and increasingly prominent area, please see our link to our offering. 

Additional reporting requirements can be placed on UK companies where they are part of a “Multinational Group”, broadly where the worldwide consolidated turnover exceed 750 million euros. This can impact on a UK regardless of its own size. Key topics:

• OECD Pillar 2 – Global Minimum Tax
• Country by Country Reporting
• Online publication of tax strategy
• Formalisation of transfer pricing documentation with OECD guidelines

There are many different tests used to determine a company/group’s size the common ones being the turnover, gross assets and number of employees but also profit levels. As different tests apply to different rules care should be taken to ensure these are reviewed regularly.

Some UK tax rules only apply when the income or expense reaches a certain size. The most common are as follows:

• The Corporate Interest Restriction rules for example only apply to restrict interest if the net interest position of the company or if a group the UK group companies exceeds a de minimis of £2 million.
• All UK incorporated companies, or those that are members of a group, whereby the group financial results disclose at least; 
  • UK turnover of £200m or more; or 
  • Gross assets of £2bn or more

Such companies must appoint a Senior Accounting Officer (“SAO”). Annual reporting is required to HMRC within 9 months of the year end.

SEE OUR INSIGHTS: TAX PAYMENTS – NEW RULES FOR ‘VERY LARGE’ COMPANIES

Back to Insights