BKLM315612 - Chargeable equity and liabilities: adjustments: step 2 in paragraph 15N: equity and liability: intra-group liabilities

Paragraphs 15R of Schedule 19

Liabilities to be left out

As with adjustments for equity issued within a group (see BKLM315611), adjustments may also be required for certain intra-group liabilities.

Chargeable UK sub-groups or entities (see BKLM315600) should leave out UK connected liabilities (see below) to:

• a chargeable UK resident entity (see BKLM315140) which is a member of the relevant group;
• a UK sub-group (see BKLM315130) of the relevant group. HMRC accepts that this includes liabilities to a designated FPE entity (see BKLM315200) in the same or in another UK sub-group of the relevant group; or
• a relevant foreign bank (see BKLM245000) which is a member of the relevant group.

UK connected liabilities (see below) to any other UK resident entity which is a member of the same UK sub-group should also be left out where that entity is:

• a member of a UK sub-group that has made an entity-by-entity election (see BKLM315500) (whether or not a designated FPE entity); or
• a designated FPE entity that is a member of a UK sub-group that has not made an entity-by-entity election.

Liabilities to a UK resident entity are UK connected liabilities except where the entity’s assets corresponding to the liabilities are assets of a foreign permanent establishment of a designated FPE entity (as determined by step 2 of paragraph 15Z1 - see BKLM315700).

Liabilities to a UK sub-group are UK connected liabilities except where the sub-group’s assets corresponding to the liabilities are assets of a non-UK resident entity or of a foreign permanent establishment of a designated FPE entity (as determined by step 2 of paragraph 15Z1).

Liabilities to a relevant foreign bank are UK connected liabilities so far as the bank’s assets corresponding to the liabilities are assets of a permanent establishment through which the bank carries on a trade in the UK (see BKLM371000).