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HMRC internal manual

Corporate Finance Manual

Debt cap: group accounts: no consolidated financial statements prepared

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

Cases in which there are no group accounts

Where the worldwide group in question has not prepared consolidated financial statements for a particular period, TIOPA10/S348 provides that TIOPA10/PT 7 applies as if financial statements had been prepared for the period under international accounting standards (IAS). However, in the case where financial statements are drawn up in accordance with IFRS and the effect of IFRS10.27 and 10.31 is that no subsidiaries are consolidated, the single entity financial statements are regarded as being the financial statements of the worldwide group - see CFM90420 and CFM92457. The same applies if UK GAAP is applied and the effect of FRS102-9.3(f) and 9.9 is that consolidated accounts are not prepared.

If the period under review is more than 12 months, it is broken up into periods of 12 months or less in the same way as accounting periods, and notional accounts are deemed to be prepared for each of these sub-periods.

S348 was amended at the time section S348A was introduced so that if the group is only a worldwide group for part of the relevant period then section 348 applies as if financial statements are drawn up in respect of the part of the relevant period that the group was a worldwide group.

From 1 April 2017 the worldwide debt cap rules are repealed and replaced with the corporate interest restriction (CIR). Where a period straddles 1 April 2017, the group is treated as having drawn up consolidated financial statements under IAS for a period ending on 31 March 2017. Draft guidance on the CIR is available online at:


Q plc is a UK quoted company, which prepares consolidated accounts for itself and its subsidiaries, drawing up the accounts to 31 March each year. In June 2011, Q plc is taken into private ownership and de-listed. As part of this change, the shares in Q plc are acquired by a Jersey company, R Ltd (which has no other subsidiaries). R Ltd is 100% owned by a Luxembourg entity, S.

S meets the definition in FISMA00/S235 of a collective investment scheme, and therefore cannot be the ultimate parent of a group (CFM90270). The ultimate parent of the group is therefore R Ltd. Although Q plc continues to draw up group accounts to 31 March, R Ltd does not prepare consolidated accounts - it prepares individual accounts to 31 December (and these accounts are available to the directors of Q plc).

In order to apply the debt cap rules, Q plc and its subsidiaries must hypothesise that R Ltd has prepared consolidated accounts under international accounting standards, and derive the necessary figures from those notional accounts.

HMRC staff should be aware that this might involve considerable work in some cases, and should not be over-prescriptive in their approach. In this example, there would be no objection to Q plc continuing to apply the debt cap rules with respect to a 31 March accounting period. Furthermore, if Q plc’s consolidated accounts have been prepared under New UK GAAP (or Old UK GAAP, so long as FRS 26 was applied), a consolidation under UK GAAP can be accepted as giving results not materially different from IFRS.