Tax and large companies

Large companies now have more tax compliance and reporting obligations than ever. In addition to their annual corporation tax return, we have summarised below some of the other key areas that may require additional notification to HMRC.


All companies should be aware of these as there are, in some cases, significant penalties for non-compliance.

Senior Accounting Officer (SAO)

Companies, or groups of UK companies, exceeding certain financial thresholds are required to appoint a Senior Accounting Officer (SAO). The rules apply to UK companies and groups exceeding the below limits in the preceding financial year:

  • Annual turnover of more than £200 million; or
  • Gross balance sheet assets in excess of £2 billion

The SAO is the director or officer of a company who has overall responsibility for the company’s financial accounting arrangements. An SAO cannot be an agent acting for the company.

The name of the SAO must be notified to HMRC by the company’s accounts filing deadline (within six months for listed companies and nine months for limited companies). Also, the SAO must certify whether appropriate tax accounting arrangements were in place throughout the year.

Failure to notify or provide a certificate to HMRC will result in a fixed penalty of £5,000 for both the company and the SAO personally.

Tax Strategy

A company must publish a tax strategy if it is part of a UK group, subgroup or partnership and in the previous financial year had one or both of:

  • Turnover above £200 million
  • Balance sheet over £2 billion

In addition, any UK companies or groups that are part of a multinational enterprise (MNE) – a group as defined by the OECD with a global turnover of over €750 million – must also publish a tax strategy.

The tax strategy should include:

  • Details of the relevant legislation it complies with
  • The financial year the strategy relates to
  • How your business manages UK tax risks
  • Your business’ attitude to tax planning
  • The level of risk your business is prepared to accept for UK taxation
  • How your company works with HMRC
  • Any other relevant information relating to taxation

The tax strategy must be published before the end of the current financial year. After the first tax strategy has been published, a new strategy must be published in the next financial year or within 15 months (whichever is sooner).

There is a penalty of £7,500 for the company if they do not publish a tax strategy. A further penalty of £7,500 will be due if the strategy is not published within six months from when it was due. Additional penalties of £7,500 will then accrue for each month until the strategy is published.

Country by Country Reporting (CbCR)

Companies will be required to file a Country by Country Report with HMRC for accounting periods starting on or after 1 January 2016 if both of the following conditions are met.

  • The company is part of a group of businesses with at least one based in the UK and at least one in another country; and
  • Consolidated group revenue is at least €750 million in the previous financial year.

CbCR is an annual report disclosing the key elements of the financial statements by tax jurisdiction. The ultimate parent entity typically files the CbCR report. Its subsidiary companies must also make a notification to their local tax authority (e.g. HMRC in the UK).

The deadline for filing a CbCR report is 12 months after the end of the accounting period.

There is an initial penalty of £300 for the late filing of reports. Further penalties of £60 per day can also accrue. Also, a penalty of £3,000 may be charged for inaccurate or incorrect reports.

Quarterly Instalment Payments (QIPs)

Quarterly Instalment Payments (QIPs) are generally payable by companies with taxable profits in excess of £1.5million. QIPs are based on an estimate of the corporation tax liability for the accounting period and payable by the 14th day of months 7, 10, 13 and 16 of the accounting period.

For example:

QIPs for the year ended 31 March 2019 would be payable by 14 October 2018, 14 January 2019, 14 April 2019 and 14 July 2019.


From 1 April 2019, a new QIPs regime is being introduced for very large companies. This is defined as those with annual taxable profits of over £20million. The profit threshold is, however, reduced if there are group companies.

QIPs for very large companies will now be payable on the 14th day of months 3, 6, 9 and 12. This means that the full tax liability for an accounting period will be payable in the same period. There will also be an overlap of payment dates in the first accounting period after 1 April 2019.

For example:

QIPs payable by a very large company for the year ended 31 March 2020 would be payable by 14 June 2019, 14 September 2019, 14 December 2019 and 14 March 2020.


This will have a real cash flow impact on very large companies and interest will be charged by HMRC on late or underpaid QIPs.

Corporate Interest Restriction (CIR)

A Corporate Interest Restriction (CIR) applies to individual companies or groups of companies that deduct over £2 million of net interest and other financing costs per annum. The CIR applies to periods beginning on or after 1 April 2017.

The corporate interest rules are complex but broadly look to restrict UK interest deductions for a group’s net interest expense, above the £2million de minimis, to the lower of:

  • 30% of the UK tax EBITDA; or
  • A measure of the worldwide group’s net external finance expense

Companies (and groups) subject to the CIR will also be required to appoint a reporting company within six months of the end of their accounting period and submit a CIR return to HMRC within 12 months of the end of the accounting period.

There is a fixed penalty of £500 if the return is up to 3 months late (increased to £1,000 if the return is more than three months late). Also, there is a further penalty of up to 100% of the additional tax due, as a result of an inaccurate return.

Transfer Pricing

Transfer pricing applies automatically to groups exceeding the following size limits (as per the definition of small and medium-sized enterprises):

  • Staff headcount of 250 employees, and
  • Annual turnover of €50 million, or
  • Balance sheet total of €43 million

The transfer pricing rules focus on the prices charged in transactions between connected parties (including transactions between UK companies). In particular, they target instances where transactions may result in a tax advantage, e.g. reducing taxable profits or increasing tax losses.

The UK legislation is based on the “arm’s length principle”, i.e. the price which would have been charged if the parties had not been connected. The transfer pricing rules apply to trading and financing (e.g. lending) transactions, both internationally and within the UK.

For companies and groups exceeding the above size limits, they will be required to calculate their taxable profits on an arm’s length basis. In addition, transfer pricing documentation should be maintained in respect of connected party transactions and explain how these are treated for tax purposes.

For companies and groups below the size limits above, an exemption applies to the transfer pricing rules (referred to as the SME exemption). The exemption does not, however, apply where a business has transactions with a related company in a territory with which the UK does not have a double tax treaty with an appropriate non-discrimination clause.

Penalties of up to £3,000 can apply for failure to keep appropriate or up to date transfer pricing documentation.

This article was written by our Tax Manager, Gemma Thake. If you would like more information on this article, please contact Gemma using the form below.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.


For more insight, events and webinars, sign up to the Price Bailey mailing list…

Sign up

Have a question about this post? Ask our team…

We can help

Contact us today to find out more about how we can help you