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HMRC internal manual

Company Taxation Manual

Corporation Tax: small profits relief: risk assessment

Enquiry risk assessments should take into account the size of the lower and upper limits (£300,000 and £1,500,000 for the financial year 2014) and the implications for these of the number of associates: plainly there is nothing to be gained from associated company enquiries where profits are below £75,000 unless there are three or more companies associated with the company under review.

If it is clear that none of a company’s shareholders or family has shares in (or has made a settlement involving any shares in) another company, or has made loans to another company, the tax risk is limited. If an enquiry is opened, perhaps as the result of information, it is essential to obtain the full facts relevant to establishing association in a case where there is potential fragmentation of profits.

BAI is unable to assist in providing technical advice where:

  • The tax at risk is £150,000 or less, or
  • A thorough fact finding exercise has not been carried out.