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HMRC internal manual

Corporate Finance Manual

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HM Revenue & Customs
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Debt cap: overview: anti-forestalling rule

Changes of accounting date by group

TIOPA10/SCH9/PARA31 is designed to prevent groups from delaying the application of the worldwide debt cap by changing the group’s accounting date. It applies where three conditions are met.

The first two conditions are objective ones. The ultimate parent of the group must change the date to which the group’s financial statements are prepared; and, as a result, there must be a period of account (‘the relevant period of account’) which begins before 1 January 2010 and includes a period that, but for the change of accounting date, would have fallen with the debt cap rules.

For example, suppose that a group which has previously prepared accounts to 31 December changes its accounting reference date to 30 November, drawing up accounts for an 11-month period to 30 November 2009. As a result, it has a period of account beginning on 1 November 2009, and including the period 1 January 2010 to 30 November 2010. If it had not made the change, the debt cap rules would have applied for this latter period.

The third condition is a test of subjective purpose. The main purpose, or one of the main purposes, of the change of accounting date must be to delay the group’s entry into the debt cap rules.

Where these conditions are met, the debt cap rules apply for the ‘relevant period of account’ of the worldwide group, even though it begins before 1 January 2010.

Cases in which this rule applies are likely to very uncommon. A change of accounting reference date by a group entails significant systems changes, and is unlikely to be undertaken only or even mainly for tax reasons. HMRC staff should seek advice from CTIAA (Financial Products Team) in any case where there has been a change of accounting date and it appears that the main purpose condition in paragraph 98 may be met.