Taxation of Corporate Investments

The accountancy practice a company adopts will be dictated by their position under the Financial Reporting Standard 102 (small entities) and 105 (micro-entities).

TAXATION OF CORPORATE INVESTMENTS - ACCOUNTANCY PRACTICES

The accountancy practice a company adopts will be dictated by their position under the Financial Reporting Standard 102 (small entities) and 105 (micro-entities). The eligibility criteria for each regime is shown below.

Many companies simply hold cash on bank or building society deposits if they have no immediate plans for it, and substantial sums may build up over a number of years.

UK Eligibility Criteria
Regime	Micro-entities regime	Small entities regime
Source of eligibility criteria	Sections 384A and 384B of the Companies Act 2006	Sections 382 to 384 of the Companies Act 2006
Eligible entities	Companies LIMITED Liability Partnerships and qualifying partnerships	Companies LIMITED Liability Partnerships Any other type of entity that would have met the criteria of the small companies regime had it been a company incorporated under company law e.g. harities
Size thresholds	A company qualifies if it does not exceed two or more of the following criteria: Turnover £632,000 Balance sheet total £316,000 No. of employees 10	A company qualifies if it does not exceed two or more of the following criteria: Turnover £10.2m Balance sheet total £5.1m No. of employees 50
Ineligible entities	Any company excluded from the small companies regime Financial institutions including credit and insurance institutions Charities Small parent companies that choose to prepare group accounts Companies that are not parent companies but whose accounts are included in group accounts	Public companies Financial institutions including insurance companies and banking companies
Accountancy practice	Historic accounting	Fair value accounting

Businesses meeting the criteria for the micro-entities regime can apply the smaller entities regime if they wish.
Businesses which exceed the criteria for small entities will be taxed on a fair value basis.
Investment companies are excluded from the micro-entities regime so will apply a fair value basis for loan relationships.

Guide to Company Owned Investments Download

Disclaimers:

Tax treatment varies according to individual circumstance and is subject to change.

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