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HMRC internal manual

Corporate Finance Manual

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HM Revenue & Customs
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Debt cap: calculating the disallowance of financing expense amounts: relevant group companies joining or leaving groups

Group joiners and leavers

Periods of account ending before 17 July 2012

TIOPA10/S329(3), for periods of account ending before 17 July 2012, specifically excludes from the financing expense of a company any amounts that arose from a transaction that took place when the company was not a relevant group company. For this purpose, an accrual of interest is a ‘transaction’ - the interest which accrues each day during a company’s period of account is a transaction of that day.

A company can become a relevant group company if when joining the group it is already a UK resident company; however it is also possible that a non-resident company may become a relevant group company by starting up a trade in the UK through a permanent establishment.

It is the period of account of the worldwide group that is relevant when deciding whether or not a company has become a relevant group company and this may be different from the period of account of the company in question.

Example

The period of account of the worldwide group is the calendar year to 31 December 2014. Company G joins the group and is a relevant group company from the 1May 2014. In March 2014, Company G took out a loan for new premises and has to pay interest on that loan. The financing expense amount for Company G will exclude interest on the loan that has accrued before 1 May 2014.

Periods of account ending on or after 17 July 2012

In FA12 there was a small amendment to this legislation to clarify that when calculating the financing expenses that you exclude any amounts that have accrued when the company was not a relevant group company.