Large companies within scope
One of the main areas of uncertainty coming out of the proposed legislation related to which companies would be considered as 'large companies' for the purposes of Schedule 46. Following meetings with HMRC and the CBI (at which HMRC were present), we gained some further clarity. Broadly speaking, 'large companies' was to cover large UK incorporated companies and large sub-groups headed by a UK incorporated company (based on Companies Act criteria). One surprising aspect of the 'large company' definition was that it also applied to relatively small UK companies which head foreign groups. Non UK incorporated (even if UK Tax Resident) companies were to fall outside of the rules, as were large branches of foreign companies.
Commons debate on 13 May 2009
While the tabled amendment for the Commons debate was only for the 12 month deferral of the legislation's implementation date, Stephen Timms, Financial Secretary to the Treasury, took the opportunity to announce various other changes:
- The base of the companies within scope will be narrowed to
'strike a better balance between safeguarding revenues from
large companies and the compliance costs for business'. The
measure will be limited to 'those companies with a large
business relationship with HMRC, and a Customer Relationship
Manager reflecting that'. Broadly, we would expect this to be
companies with a turnover in excess of £200m. However, this
will be defined further in due course.
It is unclear whether this change in approach will mean that the Companies Act definition of 'large companies' will be dropped. If this were to happen, then large branches of foreign companies and some non UK incorporated (but UK Tax resident) companies could come within the provisions, as some of these are dealt with by LBS or have a CRM.
What is clear is that it is expected that fewer groups will be within the scope than originally anticipated, but there is still uncertainty as to exactly which ones remain in.
- The proposed requirement for a large company to provide an explanation to its auditors where the requirements of the main duty are not met generated considerable resistance from companies. Stephen Timms stated that an amendment will be tabled to remove that requirement on the basis that 'it could cause operational difficulties for business which are disproprotionate to the importance of that measure'.
- It it proposed that there will only be one form of certificate which would set out either one position or the other. This is thought to be a more workable solution.
The tabled amendment to defer the commencement date, heard yesterday, was voted down 285:154. Therefore, the measures, once finalised, will be effective for Financial Years commencing after Royal Assent.
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