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HMRC internal manual

Corporate Finance Manual

Debt Cap Gateway test: CTSA returns

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

Gateway test and CTSA returns

If a group does not meet the gateway condition - in other words, if its UK net debt is less than 75% of its worldwide gross debt - nothing in the remainder of Part 7 applies to it. UK resident members of the group are under no statutory obligation to include any reference to the debt cap in their CTSA returns or computations. Nor is the group obliged to supply its gateway test calculation to HMRC unless the information is requested as part of an enquiry.

As a matter of good practice, however, and to avoid unnecessary enquiries, a group that believes it is excluded from Part 7 by the gateway test may wish to share its computation with HMRC on a voluntary basis or include a statement that it is excluded from the main debt cap rules because of the gateway test in its tax computations.

Where it is obvious that there will be no debt cap financing cost disallowance because for instance the relevant group companies financing expense amounts are less than the deminimis limit of £500,000 groups do not need to perform the gateway test.