CFM92530 - Debt cap: particular types of company: group treasury companies: periods of account beginning before11 December 2012

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

TIOPA10/S316

This guidance applies to worldwide group periods of account begning before 11 December 2012. Section 316 was substantially rewritten by FA13. For details of the post-FA13 position see CFM92535.

Conditions for being a group treasury company

In order to be a group treasury company for a particular period of account of the worldwide group, a company was required to meet three conditions. These were set out at TIOPA10/S316(6) - (8), as they stood before the FA13 ammendments.

The first, and obviously, condition is that teh company which makes an election must be a member of the worldwide group. There is no requirement for it to be a member of the group concerned throughout the whole of the relevant period of account.

Second, it must undertake treasury activities for the worldwide group. CFM92540 explains what is meant by 바카라 사이트˜treasury activities바카라 사이트™.

A company is not automatically debarred if it undertakes other income-generating activities. However, the third condition is that at least 90% of the relevant income of the company for the period of account concerned is group treasury revenue - thus a company will only qualify if its income from non-treasury activities is relatively minor.

바카라 사이트˜Group treasury revenue바카라 사이트™ is revenue that arises from the treasury activities that the company undertakes for the worldwide group. But dividends or distributions, whether from subsidiaries or from portfolio holdings, are not group treasury revenue unless they come from a company that is itself both a UK group company and a group treasury company (section 316 (11)).

The company바카라 사이트™s 바카라 사이트˜relevant income바카라 사이트™ is its income arising from its activities as a whole. When quantifying both relevant income and group treasury revenue, the measure is the amount of income given by generally accepted accounting practice (GAAP), before any deduction for expenses (or for anything else).

Unlike the definition of 바카라 사이트˜financing income amounts바카라 사이트™, this is a pure accounting measure - it is not tied to the tax treatment of the income, nor are exchange gains, or profits from derivatives, excluded. An amount is considered to be accounted for as 바카라 사이트˜such바카라 사이트™, that is to say revenue, if it is credited to the company바카라 사이트™s income statement or profit and loss account, rather than in equity or other comprehensive income.

Example

A company invests in sterling debt securities, which it accounts for as available for sale assets (under IAS 39) or at fair value through other comprehensive income (under IFRS 9). In a particular period of account, interest of £1.5 million accrues on the securities and is credited to the income statement. This will form part of the company바카라 사이트™s 바카라 사이트˜relevant income바카라 사이트™, and its 바카라 사이트˜group treasury income바카라 사이트™. Fair value changes in the securities are initially taken to equity. Any fair value increases taken to equity do not form part of the company바카라 사이트™s income. In the same period, however, the company disposes of part of the holding, and fair value losses of £0.25 million are recycled to the income statement.

The company바카라 사이트™s income from the debt securities for the relevant period is £1.25 million. If the income is reported in one line in the accounts, the 바카라 사이트˜before any deduction for expenses바카라 사이트™ requirement does not mean that the company should disaggregate amounts in the accounts and look at credits and debits separately.

If the company concerned is not a member of the worldwide group throughout the period of account, the 바카라 사이트˜90% test바카라 사이트™ should be applied only to its income arising while it is a member of the group.