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HMRC internal manual

Corporate Finance Manual

Debt cap: group accounts: introduction

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

The debt cap was repealed by Finance (No.2) Act 2017 with effect from 1 April 2017 when it was superseded by the Corporate Interest Restriction. Guidance on the new rules is available at:

Special rules apply where the period of account straddles 1 April 2017. See CFM93060 of the draft guidance for further details.

Use of group accounts - overview

The consolidated financial statements of a group of companies are important for the purposes of the worldwide debt cap, for two main reasons.

  • The period with respect to which the debt cap provisions operate is the period of account of the worldwide group. This applies both where the gateway test is being considered (see CFM90620), and where it is necessary to apply the full provisions and compute the available amount, the tested expense amount and the tested income amount.
  • The financial statements of the worldwide group are the starting point for deriving the ‘worldwide gross debt’ of the worldwide group when you apply the gateway test (TIOPA10/S264 - see CFM90690). Similarly, where it is necessary to apply the full rules, the available amount (CFM92400) is taken from the group’s financial statements.

The TIOPA10/PT7 legislation therefore contains provisions that

  • define what is meant by financial statements of the worldwide group (CFM90420) and its application to amounts disclosed in such financial statements (CFM90470),
  • set out which accounting standards are to be used in order for such financial statements to be ‘acceptable’ (CFM90440), and
  • describe what is to be done if no such financial statements are prepared (CFM90460).