Large Companies Tax

Senior Accounting Officer

The main duty of a Senior Accounting Officer (SAO) is to ensure that a qualifying company establishes and maintains appropriate tax accounting arrangements.  This means, in particular, that the SAO must take reasonable steps to monitor the accounting arrangements of the company and identify any respects in which those arrangements are not appropriate tax accounting arrangements. A SAO at the time must provide HMRC with a certificate and separately notify HMRC of the SAO. We are seeing cases where HMRC are pursuing the SAO over what appears to be simple errors.

We can also undertake VAT and PAYE reviews to help the SAO meet their obligations.

Country by Country Reporting

Multinational enterprises have to report annually and for each tax jurisdiction in which they do business. This is called a ‘Country by Country’ report. The UK legislation for Country by Country reporting was amended on 30 March 2017, coming into effect on 20 April 2017.  This amendment included a notification requirement, essentially informing HMRC where the group reporting will be filed, by whom and which UK tax resident entities it covers. Multinational groups with a consolidated revenue of €750 million or more must notify HMRC and send an annual report on certain aspects of their business activities as a requirement of the Organisation for Economic Co-operation and Development (OECD).  The report needs to be completed by the group parent company, which may not necessarily be a UK registered company.  The deadline for submitting the annual report is 12 months from the end of the relevant reporting period.  If a group needs to send a report, each subsidiary company in the UK must tell HMRC each year at the end of the reporting period:

• whether the group intends to file a full report with HMRC or with another jurisdiction which will exchange the report with HMRC
• who will be sending the report
• which country the report will be sent to
• the names and unique taxpayer references of all the UK businesses

The deadline for notification is the end of the period to which the report relates.

Pillar 2

Pillar 2 came into act for accounting periods beginning on or after 31 December 2023.

Much like country by country reporting, the objective of Pillar 2 is to ensure multinational companies with consolidated group revenue in excess of €750 million report their income but also, under Pillar 2 regulations, apply a minimum effective tax rate of 15%.

The aim of Pillar 2 is to prevent profit shifting and the exploitation of low tax jurisdictions by large multi-national companies.

Pillar 2 is compulsory for any company or group of companies which has breached the €750 million threshold in two of the previous four accounting periods and has a presence in one of the 140+ countries enforcing Pillar 2.

Once these conditions have been met, by a UK company or a group with a presence in the UK, the group must register with HMRC within 6 months from the end date of the accounting period in which the conditions are deemed to be met.

Pillar 2 requires one entity, usually the parent entity, to register and oversee payment of domestic and multi-national taxes, this can be altered based on preference but should be carefully considered across the group.

Please note, if entities meet the conditions, they must submit a return to HMRC annually regardless of being having an effective tax rate above or below 15%.

If you believe your company, or group of companies, could meet the conditions, please speak to one of our advisors to ensure you remain compliant with your registration and on-going reporting requirements.

Tax Strategy

If you’re a company, partnership, group or sub-group, you’ll need to publish a tax strategy generally on the business’ website if in the previous tax year, you have either a:

• turnover above £200 million; or
• balance sheet over £2 billion

Your tax strategy should be approved by your Board of Directors and be in line with the overall strategy and operation of your business.  It does not need to include the amounts of taxes and duties paid as part of your tax strategy, or information that might be commercially sensitive.

Corporate Interest Restriction

When calculating how much Corporation Tax is payable by a company or group, there’s a limit (known as a Corporate Interest Restriction) to the amount of tax relief that can be claimed on a group basis for deducting net interest and other financing costs.  These rules were introduced from 1 April 2017 and only apply to individual companies or groups of companies that will deduct in the UK over £2 million in a 12-month period. A company or group is able to carry forward unused interest allowances for up to 5 years to reduce a future interest restriction.  However, for this to apply, the company or group must appoint a reporting company and submit an annual abbreviated return within a permitted timescale.  They can then access any unused carry forward interest allowances by replacing that abbreviated return with a full return for that period of account.

Loss Restriction Rules

There are restrictions on the total amount of carried forward losses that can be offset against profits of accounting periods from 1 April 2017.  These apply to carried forward losses so that the total amount that can be relieved is broadly restricted to the amount of an allowance up to £5 million, plus 50% of remaining profits after deduction of the allowance.

Corporation Tax in Instalments

Generally, companies whose taxable profits exceed £1.5 million must pay their Corporation Tax electronically by instalments. For very large companies with taxable profits exceeding £20 million, they will be required to pay instalments earlier in respect of accounting periods that begin after 1 April 2019. These thresholds are divided by the number of active associated companies.

Determining the total number of active associated companies is vital in maintaining compliant corporation tax payments. Should the company overlook associated companies, their tax will in some instances be paid late, resulting in interest owed to HMRC.

Please contact us for further information on any of the above or to arrange a meeting with one of our Corporate Tax specialists.