C1C3C2F1Part 10F1Corporate interest restriction
Pt. 10 excluded by 2010 c. 4, s. 937NA (as inserted (with effect in accordance with Sch. 5 para. 25(1)(2) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 7)
Pt. 10 excluded by 2010 c. 4, s. 938V(d) (as substituted (with effect in accordance with Sch. 5 para. 25(1)(2) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 9)
Pt. 10 excluded by 2010 c. 4, s. 938N(e) (as substituted (with effect in accordance with Sch. 5 para. 25(1)(2) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 8)
F1CHAPTER 11Interpretation etc
Determining the worldwide group
473Meaning of “a worldwide group”, “ultimate parent” etc
1
In this Part “a worldwide group” means—
a
any entity which—
i
is a relevant entity (see section 474), and
ii
meets the first or second non-consolidation condition (see subsections (2) and (3)), and
b
each consolidated subsidiary (if any) of the entity mentioned in paragraph (a).
2
The first non-consolidation condition is that the entity—
a
is a member of an IAS group, and
b
is not a consolidated subsidiary of an entity that—
i
is a relevant entity, and
ii
itself meets the first non-consolidation condition.
3
The second non-consolidation condition is that the entity is not a member of an IAS group.
4
In this Part—
a
references to “a member” of a worldwide group are to an entity mentioned in subsection (1)(a) or (b);
b
references to “the ultimate parent” of a worldwide group are to the entity mentioned in subsection (1)(a);
c
references to “a single-company worldwide group” are to a worldwide group whose only member is its ultimate parent;
d
references to “a multi-company worldwide group” are to a worldwide group with two or more members.
5
In this section “IAS group” means a group within the meaning given by international accounting standards.
474Interpretation of section 473: “relevant entity”
1
In section 473 “relevant entity” means—
a
a company, or
b
an entity the shares or other interests in which are listed on a recognised stock exchange and are sufficiently widely held.
2
Shares or other interests in an entity are “sufficiently widely held” if no participator in the entity holds more than 10% by value of all the shares or other interests in the entity.
Section 454 of CTA 2010 (meaning of participator) applies for the purposes of this subsection.
3
The following are not relevant entities—
a
the Crown,
b
a Minister of the Crown,
c
a government department,
d
a Northern Ireland department, or
e
a foreign sovereign power.
475Meaning of “non-consolidated subsidiary” and “consolidated subsidiary”
1
An entity (“X”) is a “non-consolidated subsidiary” of another entity (“Y”) at any time (“the relevant time”) if—
a
X is a subsidiary of Y at the relevant time, and
b
if Y were required at the relevant time to measure its investment in X, it would be required to do so using fair value accounting F5....
2
An entity (“X”) is a “consolidated subsidiary” of another entity (“Y”) at any time if, at that time, X is a subsidiary, but not a non-consolidated subsidiary, of Y.
F63
In this section “subsidiary” has the meaning given by international accounting standards.
4
For the purposes of this section, assume that all entities are subject to international accounting standards.
5
This section has effect for the purposes of this Part.
476Continuity of identity of a worldwide group through time
1
This section applies for the purpose of determining whether a group of entities that constitutes a worldwide group at any time (“Time 2”) is the same worldwide group as a group of entities that constitutes a worldwide group at an earlier time (“Time 1”).
2
The group at Time 2 is the same worldwide group as the group at Time 1 if and only if the entity that is the ultimate parent of the group at Time 2—
a
was the ultimate parent of the group at Time 1, and
b
was the ultimate parent of a worldwide group at all times between Time 1 and Time 2.
477Treatment of stapled entities
1
This section applies where two or more entities—
a
would, apart from this section, each be the ultimate parent of a worldwide group, and
b
are stapled to each other.
2
This Part has effect as if—
a
the entities were consolidated subsidiaries of another entity (the “deemed parent”), and
b
the deemed parent fell within section 473(1)(a) (conditions for being the ultimate parent of a worldwide group).
3
For the purpose of this section an entity (“entity A”) is “stapled” to another entity (“entity B”) if, in consequence of the nature of the rights attaching to the shares or other interests in entity A (including any terms or conditions attaching to the right to transfer the interests), it is necessary or advantageous for a person who has, disposes of or acquires shares or other interests in entity A also to have, dispose of or acquire shares or other interests in entity B.
478Treatment of business combinations
1
This section applies where two entities—
a
would, apart from this section, each be the ultimate parent of a worldwide group, and
b
are treated under international accounting standards as a single economic entity by reason of being a business combination achieved by contract.
2
This Part has effect as if—
a
the two entities were consolidated subsidiaries of another entity (the “deemed parent”), and
b
the deemed parent fell within section 473(1)(a) (conditions for being the ultimate parent of a worldwide group).
3
In this section “business combination” has the meaning given by international accounting standards.
Financial statements and periods of account
479“Financial statements” of a worldwide group
1
References in this Part to “financial statements” of a worldwide group for a period are (subject to subsection (2)) to consolidated financial statements of the worldwide group's ultimate parent and its subsidiaries in respect of the period.
2
Where the worldwide group is at all times during the period a single-company worldwide group, the references are to financial statements of the ultimate parent in respect of the period.
3
The basic rule is that the references mentioned in subsections (1) and (2) are to financial statements that are drawn up by or on behalf of the ultimate parent.
4
But see—
a
section 481 for provision under which, in specified circumstances, financial statements of a worldwide group are treated as having been drawn up in accordance with different accounting standards from those in accordance with which they are drawn up by or on behalf of the ultimate parent;
b
section 482 for provision under which, in specified circumstances, financial statements of a worldwide group are treated as consolidating different subsidiaries from those consolidated in financial statements drawn up by or on behalf of the ultimate parent;
c
section 483 for provision under which, in specified circumstances, financial statements of a worldwide group are treated as having been drawn up where the ultimate parent has drawn up consolidated financial statements covering more than one worldwide group;
d
sections 484 to 486 for provision under which, where financial statements of a worldwide group are not drawn up by or on behalf of the ultimate parent, financial statements of the group are treated as having been drawn up.
5
See also section 487 (under which financial statements drawn up by or on behalf of an entity, but for too long a period or too late, are ignored for the purposes of this Part).
480“Period of account” of worldwide group
References in this Part to a “period of account” of a worldwide group are to—
a
a period in respect of which financial statements of the group are drawn up by or on behalf of the ultimate parent, or
b
a period in respect of which financial statements of the group are treated as drawn up for the purposes of this section (whether under any of sections 481 to 485 or under any other enactment).
481Actual financial statements not drawn up on acceptable principles
1
This section applies where financial statements of a worldwide group for a period drawn up by or on behalf of the ultimate parent are not drawn up on acceptable principles.
2
For the purposes of this Part (apart from this section)—
a
the financial statements mentioned in subsection (1) are to be ignored, and
b
IAS financial statements of the worldwide group are treated as having been drawn up in respect of the period.
3
For the purposes of this Chapter financial statements are “drawn up on acceptable principles” only if condition A, B, C or D is met.
4
Condition A is that the financial statements are IAS financial statements.
5
Condition B is that the amounts recognised in the financial statements are not materially different from those that would be recognised in IAS financial statements of the worldwide group, if such statements were drawn up.
6
Condition C is that the financial statements are drawn up in accordance with UK generally accepted accounting practice.
7
Condition D is that the financial statements are drawn up in accordance with generally accepted accounting principles and practice of one of the following territories—
a
Canada;
b
China;
c
India;
d
Japan;
e
South Korea;
f
the United States of America.
8
The Commissioners may by regulations amend this section so as to alter the circumstances in which financial statements are “drawn up on acceptable principles” for the purposes of this Chapter.
482Actual financial statements drawn up on acceptable principles but consolidating wrong subsidiaries
1
This section applies where financial statements of a worldwide group for a period drawn up by or on behalf of the ultimate parent are drawn up on acceptable principles but—
a
do not consolidate one or more entities that are IAS subsidiaries, or
b
consolidate one or more entities that are not IAS subsidiaries.
2
In this section “IAS subsidiary”, in relation to a period, means an entity which would be required to be consolidated with those of the ultimate parent in IAS financial statements of the group for the period.
3
For the purposes of this Part (apart from this section)—
a
the financial statements mentioned in subsection (1) are to be ignored, and
b
consolidated financial statements of the ultimate parent and its IAS subsidiaries are treated as having been drawn up in respect of the period.
4
The financial statements treated by subsection (3)(b) as drawn up are treated as drawn up in accordance with the same accounting principles and practice as the financial statements mentioned in subsection (1).
5
In this section a reference to financial statements consolidating the results of an entity is to consolidating its results with those of the ultimate parent as the results of a single economic entity.
483Actual financial statements covering more than one worldwide group
1
This section applies where—
a
consolidated financial statements of an entity and its subsidiaries are drawn up by or on behalf of the entity in respect of a period (“the actual period of account”), and
b
the entity was the ultimate parent of a worldwide group for a part (but not all) of that period.
2
For the purposes of this Part (apart from this section)—
a
the financial statements mentioned in subsection (1)(a) are to be ignored, and
b
consolidated financial statements of the entity and its IAS subsidiaries are treated as having been drawn up in respect of the part of the actual period of account mentioned in subsection (1)(b).
3
The financial statements treated by subsection (2)(b) as drawn up are treated as drawn up—
a
where the financial statements mentioned in subsection (1)(a) are drawn up on acceptable principles, in accordance with the same accounting principles and practice as those financial statements;
b
otherwise, in accordance with international accounting standards.
4
In this section “IAS subsidiary” has the same meaning as in section 482.
484No actual financial statements: ultimate parent draws up financial statements
1
Subsection (2) applies where—
a
financial statements of the ultimate parent of a worldwide group are drawn up by or on behalf of the ultimate parent in respect of a period (“the relevant period”),
b
consolidated financial statements of the ultimate parent and its subsidiaries are not drawn up by or on behalf of the ultimate parent in respect of the relevant period or any part of it, and
c
the group was, at any time during the relevant period, a multi-company worldwide group.
2
For the purposes of this Part (apart from this section) IAS financial statements of the worldwide group are treated as drawn up in respect of the relevant period.
3
The ultimate parent may elect that subsection (2) is not to apply in relation to financial statements of the ultimate parent.
4
An election under subsection (3)—
a
has effect in relation to financial statements in respect of periods ending on or after such date as is specified in the election, and
b
is irrevocable.
5
The date specified in the election may not be before the day on which the election is made.
485No actual financial statements: other cases
1
In this section “accounts-free period” means (subject to subsection (2)) any period—
a
which begins on or after 1 April 2017,
b
throughout which a worldwide group exists, and
c
in respect of no part of which are financial statements of the group—
i
drawn up by or on behalf of the ultimate parent, or
ii
treated as drawn up for the purposes of this section (whether under section 481, 482, 483 or 484 or any other enactment).
2
A period is not an “accounts-free period” if it forms part of an accounts-free period.
3
If an accounts-free period in relation to a worldwide group is 12 months or less, IAS financial statements of the worldwide group are treated for the purposes of this Part (apart from this section) as having been drawn up for the accounts-free period.
4
If an accounts-free period in relation to a worldwide group is more than 12 months, IAS financial statements of the worldwide group are treated for the purposes of this Part (apart from this section) as having been drawn up for each of the following periods—
a
the first period of 12 months falling within the accounts-free period;
b
any subsequent period of 12 months falling within the accounts-free period;
c
any period of less than 12 months which—
i
begins immediately after the end of a period mentioned in paragraph (a) or (b), and
ii
ends at the end of the accounts-free period.
486Election altering period of account deemed under section 485
1
This section applies where, disregarding this section, IAS financial statements of a worldwide group would be treated under section 485(4)(a) or (b) as drawn up for a period (“the default period of account”) during an accounts-free period.
2
The ultimate parent of the group may make an election under this section in relation to the default period of account.
3
Where an election under this section is made, section 485 has effect as if subsection (4)(a) or (b) of that section—
a
did not treat IAS financial statements of the group as having been drawn up for the default period of account;
b
instead, treated IAS financial statements of the group as having been drawn up for the period—
i
beginning with the day on which the default period of account begins (“the start day”), and
ii
ending with such day after the start day as is specified in the election (“the end day”).
4
The end day must—
a
fall within the accounts-free period, and
b
not be later than the final day of the period of 18 months beginning with the start day.
5
An election under this section—
a
must be made before the end day, and
b
is irrevocable.
6
The fact that the ultimate parent of a worldwide group makes an election under this section in relation to a default period of account (“the earlier elected period”) does not prevent it from making an election in relation to a later default period of account (“the later elected period”).
7
But where it does so, the end day in relation to the later elected period must be 3 years or more after the end day in relation to the earlier elected period.
8
Where this section modifies section 485(4)(a) or (b) so that it treats IAS financial statements of the group as having been drawn up for the period mentioned in subsection (3)(b) of this section (“the elected period”), section 485(4)(b) and (c) apply in relation to any part of the accounts-free period following the end of the elected period.
9
In this section “accounts-free period” has the same meaning as in section 485.
487Actual financial statements ignored if for too long a period or too late
Financial statements drawn up by or on behalf of any entity are to be ignored for the purposes of this Part (apart from this section) if—
a
the period in respect of which they are drawn up is more than 18 months, or
b
they are drawn up after the end of the period of 30 months beginning with the beginning of the period in respect of which they are drawn up.
488Meaning of “IAS financial statements”
1
References in this Part to “IAS financial statements” of a worldwide group for a period are (subject to subsection (2)) to consolidated financial statements of the worldwide group's ultimate parent and its subsidiaries, drawn up in respect of the period in accordance with international accounting standards.
2
If the worldwide group is at all times during the period a single-company worldwide group, the references are instead to financial statements of the ultimate parent, drawn up in respect of the period in accordance with international accounting standards.
489References to amounts recognised in financial statements
1
References in this Part to an amount “recognised” in financial statements—
a
include an amount comprised in an amount so recognised;
b
are, where the amount is expressed in a currency other than sterling, to that amount translated into its sterling equivalent.
2
The exchange rate by reference to which an amount is to be translated under subsection (1)(b) is the average rate of exchange for the period of account, calculated from daily spot rates.
3
References in this Part to an amount recognised in financial statements “for a period” as an item of profit or loss include references to an amount that—
a
was previously recognised as an item of other comprehensive income, and
b
is transferred to become an item of profit or loss in determining the profit or loss for the period.
Other definitions
490Meaning of “relevant accounting period”
For the purposes of this Part a “relevant accounting period” of a company, in relation to a period of account of a worldwide group, means any accounting period that falls wholly or partly within the period of account of the worldwide group.
491Meaning of “relevant public body”
1
In this Part “relevant public body” means—
a
the Crown,
b
a Minister of the Crown,
c
a government department,
d
a Northern Ireland department,
e
a foreign sovereign power,
f
a designated educational establishment (within the meaning given by section 106 of CTA 2009),
g
a health service body (within the meaning given by section 986 of CTA 2010),
h
a local authority or local authority association,
i
any other body that acts under any enactment for public purposes and not for its own profit, or
j
any wholly-owned subsidiary of any body falling within any of the above paragraphs of this subsection.
2
In this section “enactment” includes—
a
an enactment contained in subordinate legislation within the meaning of the Interpretation Act 1978,
b
an enactment contained in, or in an instrument made under, an Act of the Scottish Parliament,
c
an enactment contained in, or in an instrument made under, a Measure or Act of the National Assembly for Wales, and
d
an enactment contained in, or in an instrument made under, Northern Ireland legislation.
3
The Commissioners may by regulations amend this section so as to alter the meaning of “relevant public body”.
4
The provision that may be made by the regulations does not include provision altering the meaning of “relevant public body” so that it includes a person who has no functions of a public nature.
492Meaning of “UK group company”
In this Part “UK group company”, in relation to any time during a period of account of a worldwide group, means a company—
a
which is within the charge to corporation tax at that time, and
b
which is a member of the group at that time.
493Embedded derivatives
Sections 415 and 585 of CTA 2009 (loan relationships with embedded derivatives) apply for the purposes of this Part of this Act.
494Other interpretation
1
In this Part—
“the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs;
“fair value accounting” means a basis of accounting under which—
- a
assets and liabilities are measured in the company's balance sheet at their fair value, and
- b
changes in the fair value of assets and liabilities are recognised as items of profit or loss;
- a
“fair value” has the meaning it has for accounting purposes;
F3“finance lease”, in relation to a company or a worldwide group, a lease which—
- a
in accordance with generally accepted accounting practice, falls (or would fall) to be treated, in the accounts of the company or the financial statements of the group, as a finance lease or loan, or
- b
is a right-of-use lease that would fall to be treated in those accounts or financial statements as a finance lease if the company or group were required to determine for accounting purposes whether the lease falls to be so treated;
- a
“interest restriction return” means a return submitted under any provision of Schedule 7A;
F2“pension scheme” has the meaning given by section 150(1) of FA 2004;
“reporting company” means a company which is for the time being appointed under any provision of Schedule 7A;
“the return period”, in relation to an interest restriction return of a worldwide group, means the period of account of the group to which the return relates;
F4“right-of-use lease” means a lease in respect of which, under generally accepted accounting practice—
- a
a right-of-use asset falls (or would fall) at the commencement of the lease to be recognised for accounting purposes in the accounts of the lessee, or
- b
a right-of-use asset would fall to be so recognised but for the lessee granting a sublease of the leased asset,
and, in determining whether a lease falls within paragraph (a) or (b) at any time in an accounting period, it is to be assumed that the accounting policy applied in drawing up the lessee’s accounts for the period also applied at the commencement of the lease;
- a
“service concession arrangement” has the meaning given by international accounting standards;
“wholly-owned subsidiary” has the meaning given by section 1159(2) of the Companies Act 2006.
2
For the purposes of this Part a person who is not a company is regarded as being a party to a loan relationship if the person would be so regarded for the purposes of Part 5 of CTA 2009 if the person were a company.
F73
The definition of “insurance company” in section 65 of FA 2012 (which is applicable to this Part as a result of section 141(2) of that Act) has effect for the purposes of this Part as if, in subsection (2)(a), the reference to Part 4A of the Financial Services and Markets Act 2000 included a reference to the law of a territory outside the United Kingdom which is similar to or corresponds to that Part.
Regulations
495Financial statements: different treatment by group or members
1
The Commissioners may make regulations for the purpose of altering any calculation under Chapter 7 where—
a
the financial statements of a worldwide group for a period include or omit an amount in respect of any matter, and
b
any member of the group deals with that matter for tax or accounting purposes in a different way.
2
The regulations—
a
may make provision subject to an election or other specified circumstances, and
b
may make provision having effect in relation to any period beginning before the regulations are made if the period begins at some time in the calendar year in which the regulations are made.
496Parties to capital market arrangements
1
The Commissioners may make regulations entitling—
a
a UK group company which has a liability to corporation tax as a result of this Part and which is a party to a capital market arrangement, and
b
another UK group company,
to make a joint election transferring the liability to the other UK group company.
2
The regulations may include provision—
a
specifying other conditions that must be met for an election to be made,
b
requiring an election to be made on or before a particular time (for example, before the accounting period for which the liability arises),
c
authorising or requiring an officer of Revenue and Customs (on the exercise of a discretion or otherwise) to accept or reject an election,
d
authorising or requiring an officer of Revenue and Customs (on the exercise of a discretion or otherwise) to revoke an election previously in force and dealing with the effect of the revocation, and
e
dealing with the effect of the transfer of the corporation tax liability on any other liabilities that relate to the transferred corporation tax liability.
3
In this section “capital market arrangement” has the same meaning as in section 72B(1) of the Insolvency Act 1986 (see paragraph 1 of Schedule 2A to that Act).
497Change in accounting standards
1
The Treasury may by regulations amend this Part to take account of a change in the way in which amounts are, or may be, presented or disclosed in financial statements where the change results from the issue, revocation, amendment or recognition of, or withdrawal of recognition from, an accounting standard by an accounting body.
2
For this purpose—
“accounting standard” includes any statement of practice, guidance or other similar document, and
“accounting body” means—
- a
the International Accounting Standards Board (or successor body), or
- b
the Accounting Standards Board (or successor body).
- a
3
The regulations—
a
may make provision subject to an election or other specified circumstances, and
b
may make provision having effect in relation to any period beginning before the regulations are made if the change mentioned in subsection (1) is relevant to that period.
4
A statutory instrument containing regulations which are capable of increasing the liability of a company to corporation tax may not be made unless a draft of the instrument is laid before, and approved by a resolution of, the House of Commons.
498Regulations
Regulations under this Part may—
a
make different provision for different cases or circumstances,
b
include supplementary, incidental and consequential provision, or
c
make transitional provision and savings.
Pt. 10: the existing Pt. 10 renumbered as Pt. 11 (except for ss. 375, 376 which are repealed), the existing ss. 372-374, 377-382 renumbered as ss. 499-507 and a new Pt. 10 (ss. 372-498) inserted (with effect in accordance with Sch. 5 para. 25(1)-(3) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 1, 10(1)(2)(a)(3) (with Sch. 5 paras. 27, 32-34)