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HMRC internal manual

Corporate Finance Manual

Debt cap: failure to make statements of allocation: provision of information to group companies

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

Responsibilities for sharing information

If a company has to make a reduction, whether of allowable financing expenses or of taxable financing income, it is important that certain information is provided within the group so that the reduction and its consequences can be determined. The statutory provisions are at regulations 16 and 30 of the Financing Costs and Income Regulations.

The responsibilities fall on the ‘ultimate UK parent’. This is defined in regulation 3: it is a corporate entity which is a UK resident member of the worldwide group (so that Chapters 3 and 4 of PT7 apply to it), but which is not a direct or indirect subsidiary of any other UK resident corporate entity. A collective investment scheme cannot be a UK ultimate parent.

The UK ultimate group parent

The ultimate UK group parent has to provide the company required to make the reduction with the following information for the worldwide group for the relevant period of account.

For reductions of finance expense:

  • the tested expense amount; and
  • the total disallowed amount.
  • For reductions of financing income:
  • the total of the unrestricted reductions;
  • the total disallowed amount; and
  • the tested income amount.

To enable the group company to calculate the reduction, the information must be supplied by the ultimate UK parent before the filing date for the company’s tax return.

Reductions of financing expense made by the relevant group company

If the reductions are to financing expenses then the company required to make the reductions is also obliged to notify its ultimate UK parent of the reductions it has made. If the company made an election to allocate the default reduction (see CFM91840) then it should also provide its ultimate UK parent with a copy of the election. Similarly if the company made any error in calculating its net financing deduction for the relevant period it should provide details to its ultimate UK parent along with the correct amount. All of this information must be provided to the ultimate UK parent by the date on which the company delivers its company tax return.