Cash pooling ― overview

Produced by a Tolley Corporation Tax expert

Corporation Tax

Guidance

This guidance note provides an introduction to the cash management technique known as cash pooling.

What is cash pooling?

Cash pooling is the generic term for one of the most fundamental and popular cash management techniques and is an integral part of liquidity / working capital management. Companies also operate cash pooling in order to optimise interest paid to them. The bank has regard to the aggregated balance of all the accounts in the pool when calculating the interest payable (or receivable) by the group.

Cash pooling means that companies combine their debit and credit positions on multiple bank accounts into a single amount. It may be undertaken manually or, more commonly, with the help of automated banking products.

Banks are able to offer cash management tools with increasing ease due to the standardisation of cross-border clearing and payment systems. Many banks have developed a range of specific cash pooling products to help treasurers manage cash more effectively in this way.

A number of potential tax issues need to be considered when setting up a cash pooling

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