HMRC internal manual

Corporate Finance Manual

Debt cap: gateway test: group companies with different accounting periods to that of the worldwide group

You should check the other guidance available on GOV.UK from HMRC as Brexit updates to those pages are being prioritised before manuals.

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

Establishing the start and end dates for group companies whose accounting periods don’t match that of the worldwide group

Many relevant group companies or group securitisation companies will prepare their annual financial statements to the same date of that of the group. But there will be groups with relevant group companies that have different accounting periods. This will happen in the following circumstances.

  • The accounting period of the group company does not coincide with the group; for example a worldwide group prepares consolidated financial statements to the 31 December each year and one of its group companies prepares accounts to 30 November each year.
  • A new group company is established or acquired part way through the period of account of the worldwide group.
  • A group company is struck off, put into liquidation (and ceases to be a 75% subsidiary as a result), sold, or its shareholding reduced so it is no longer a relevant group company, part way through the period of account of the worldwide group.
  • A group member begins, or ceases, to be resident in the UK part way through the period.

Non-coterminous accounting periods

Where a company is a relevant group company or a group securitisation company throughout the period of account of the worldwide group, but has a different accounting period to that of the group, the start date and end date for establishing its net debt are the first and last days of the period of account of the worldwide group. In such a case, TIOPA10/S265 (2) applies and the figures of net debt at the start date and end date for a period of account are taken as the amounts that would be disclosed in a balance sheet of the company if one were prepared in accordance with GAAP (which means prepared in accordance with either UK GAAP or IAS) at those dates.

The company is not required to actually prepare a full audited balance sheet; it only needs to consider what the amounts of relevant liabilities (see CFM90710) and relevant assets (see CFM90720) would be at the start and end of the accounting period were a balance sheet prepared.

For companies joining or leaving a group see CFM90655.