The Companies (Accounting) Act 2017 has had a big impact on the number of groups required to prepare and file consolidated accounts. The first wave of companies affected were those with years ending 31 December 2017.
The old and new thresholds are set out below. The amounts specified are the combined amounts of the holding company and its subsidiaries. Groups that meet two out of three of the size criteria in relation to the current and previous financial years lose or gain the status.
While the filing in Companies Office of consolidated financial statements allows creditors, employees and other stake-holders gain a financial understanding of the group as a whole, the downside is the higher compliance costs and competitors gaining an advantage.
Section 357 guarantee
Under the previous Act, consolidated accounts could be filed in the Companies Office without the requirement to file the stand-alone financial statements of the subsidiaries if a “Section 17” guarantee was provided by the holding company. The “Section 17” guarantee covered all the liabilities reflected in the financial statements. “Section 357” now over-writes “Section 17” and the guarantee now covers all commitments entered, not just those reflected as liabilities. As an example, this now incorporates future lease payments or other similar future commitments and as such is a more onerous guarantee.
New Interest Deductibility Rules
Based on the proposals under the EU Anti-Tax Avoidance Directive (“ATAD”), interest deductibility could be limited to 30% of EBITDA and each Group will have a threshold of c.€3m before the limitation rules apply. More will be known on the EU ATAD restrictions later in 2019. Its introduction may see Groups being dis-assembled to make the best use of the threshold or creation of new groups.
Group Directors are examining re-structure options to avoid filing of consolidated accounts and to maximise future loan interest deductions.
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