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:
Tax considerations due to the ‘Size’ of company/group
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.
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.
Certain disclosure requirements such as the Country by Country Reporting rules also only apply if a company/group reach a certain ‘size’ limit.
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.
Tax considerations due to the Size of income/expense
Some UK tax rules only apply when the income or expense reaches a certain size. 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.
Tax considerations as company part of a group
Irrespective of a group’s ‘size’ a group will need to consider tax including but not limited to issues such as the best utilisation of group losses including the utilisation or potential restriction of losses brought forward from prior years and maximising the annual investment allowances (capital allowances).