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HMRC internal manual

Senior Accounting Officer Guidance

From
HM Revenue & Customs
Updated
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What is a qualifying company: conditions for a qualifying company: company leaves a group

Company leaves a group

Where a company leaves a group during a financial year, it may still be a qualifying company for that year.

This is because the turnover and balance sheet total tests relate to the financial conditions at the end of the company’s preceding financial year:

  • the level of the company’s own turnover and/or balance sheet total in the preceding year may be sufficient to make it a qualifying company or
  • even if the company’s own turnover and/or balance sheet total in the preceding year is insufficient to make it a qualifying company, at that time the company was a member of a group. So an aggregation needs to be made of the turnover and balance sheet totals of the UK companies within the group at that time in order to decide whether the company is a qualifying company for the year in which it leaves.

Example

Company A has financial years that end on 31 December. It has been part of a group of companies for many years. Its own turnover and balance sheet totals have been consistently modest and do not reach the qualifying company limits for these items. However, the aggregate turnover and/or balance sheet total of the UK companies within the group has been such that Company A has been a qualifying company.

Company A leaves the group on 31 March 2014. In determining whether it is a qualifying company for its financial year to 31 December 2014, its responsible officers must consider

  • its UK incorporation for the year ended 31 December 2014 and
  • its turnover and/or balance sheet total for the year ended 31 December 2013.

At the end of the year ended 31 December 2013 Company A was a member of the group. So the turnover and/or balance sheet total to be considered is the aggregate of all the UK companies.

In the year ended 31 December 2015, the responsible officers of company A must again determine whether it is a qualifying company. For this year, they must consider the turnover and/or balance sheet total for the financial year ended 31 December 2014. At the end of that financial year Company A was not a member of a group. So the turnover and/or balance sheet total they must consider is that of Company A alone.

For the situation where a company leaves a group and joins another group, see SAOG11320.

FA09/SCH46/PARA15(4)