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HMRC internal manual

Corporate Finance Manual

Debt cap: financial services groups: activities ancillary to lending activities

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

Circumstances under which activities that are ancillary to lending activity will be a qualifying activity

The first qualifying activity also includes activities that are ancillary to lending activities. TIOPA10/S268 (5) explains that the term ‘activities’ includes buying, holding, managing and selling assets.

The term ‘ancillary’ is not defined and therefore takes its day to day meaning of being something that is of secondary importance or subordinate to an activity within section 268 (1) (a) to (h). It is intended to cover activity that is not strictly lending activity but is activity that only takes place because of lending activity.

An example would be the selling of an insurance product in respect of a loan made by the group, in which case the fees would be treated as income from qualifying activities. Note that the ancillary activity must relate to and be linked to a lending activity - the fees from the provision of an insurance product to protect a loan not made by the group would not be income from a qualifying activity.

 TIOPA10/S268 (2) reinforces the concept that income from ancillary activities must be subordinate to income from the other lending activities in section 268 (1) (a) - (g). It excludes ancillary activities where the income from those ancillary activities forms a significant part of the total income from all of the ancillary activities and a significant part of the total income derived from the lending activities of the worldwide group.

So where, for example, the income from ancillary activities of the group total includes fees of £100 million and the income of the group from both lending activities and ancillary activities is £20 billion, the income derived from the ancillary activities is not significant.