ACCA Advanced Taxation (ATX) Practice Exam

For a group payment arrangement, do all associated companies need to be large companies?

1. Yes, all must meet large company criteria

2. No, at least one must be a large company

3. No, but at least half must be large

4. Yes, but only for special circumstances

The correct answer is: No, at least one must be a large company

In the context of a group payment arrangement, it is sufficient for at least one of the associated companies to meet the criteria of being a large company. This means that while the entire group does not need to consist solely of large companies, having one large company establishes the necessary framework for the group payment arrangement. This flexibility allows smaller companies within the group to benefit from the arrangement, as the major administrative control and oversight is typically linked to the large company. It ensures that the group payment arrangements can still be conducted under the relevant tax regulations while promoting inclusivity for smaller members of the group. Understanding this principle is important because it highlights how businesses can organize their tax obligations, allowing for efficiencies and potential tax advantages through such arrangements, especially in groups where financial capabilities vary significantly among members.