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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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