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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 exemption of financing income amounts: UK group companies joining or leaving the group

Group joiners and leavers

Periods of account ending before 17 July 2012

TIOPA10/Section 330(3), for periods of account ending before 17 July 2012, specifically excludes from the financing income amount of a company any amounts that arose from a transaction that took place when the company was not a UK group company.

A company can become a UK 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 UK 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 UK 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 UK group company from the 1May 2014. In January 2014 Company G placed £3 million on a long term deposit from which it receives interest. Interest on this deposit arises, in part, before Company G became a UK group company and so the financing income amount for Company G should exclude any interest receivable accruing 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, you exclude any amounts the have accrued when the company was not a UK group company.