CFM90210 - Debt cap: groups affected: introduction

This guidance applies to worldwide group periods of account ending before or straddling 1 April 2017.

Which groups are affected by the debt cap rules?

The worldwide debt cap rules provide an objective measure of the net financing expenses of the UK part of a group against the gross financing expenses of the worldwide group as a whole. The rules also contain a gateway test that compares the UK net debt of a group with the gross debt of the worldwide group. It follows that identifying the entities that make up the worldwide group and the UK part of that group is key the operation of the rules.

The legislation in TIOPA10/PART7 contains provisions that:

  • define what is meant by the worldwide group.
  • identify the ultimate parent of the worldwide group.
  • identify those group companies whose net financing expenses and net debt will be compared with the gross financing expenses and gross debt of the worldwide group (바카라 사이트˜relevant group companies바카라 사이트™).
  • identify those group companies whose net financing income can be disregarded where there has been a disallowance of financing expense amounts under the debt cap rules (바카라 사이트˜UK group companies바카라 사이트™).

TIOPA10/S337 defines 바카라 사이트˜the worldwide group바카라 사이트™ as any group of entities that is large (and contains one or more 바카라 사이트˜relevant group companies바카라 사이트™).

TIOPA10/S344(1) defines a group as being large if any member of the group is not a micro, small or medium sized enterprise as defined in the Annex to European Commission Recommendation 2003/361/EC of 6 May 2003 (see CFM90230).

It follows that the debt cap rules can apply to both UK headed and foreign headed large groups and will apply to large groups whose members are all tax resident in the UK.

For the full definition of 바카라 사이트˜relevant group company바카라 사이트™ see CFM90240, but in essence it is a company member of a group that is tax resident in the UK or has a permanent establishment in the UK and is a 75% subsidiary of the ultimate parent.

The full definition of 바카라 사이트˜UK group company바카라 사이트™ is given at CFM90250, but it is essentially any company member of a group that is tax resident in the UK or has a permanent establishment in the UK.