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HMRC internal manual

Corporate Finance Manual

CFM95420 Interest restriction


The rules provide for the situation where the ultimate parent does not draw up financial statements for either the group or itself, for a period throughout which it is the ultimate parent of the group. Where this is the case, it is necessary to first determine the accounts-free period and then, secondly, determine the resulting default period of accounts based on this period.

Accounts-free period

The accounts-free period is taken to be any period which begins on or after 1 April 2017 throughout which the worldwide group exists but no financial statements for the group are prepared or treated as prepared (other than in consequence of S485 or S486) for the accounts-free period. Financial statements are treated as prepared for the worldwide group if, for example, the ultimate parent draws up statements for itself or for a different group.

Default period of accounts

If the accounts-free period is 12 months or less then the period of account is taken to be the accounts-free period.

If the accounts-free period is longer than 12 months, that period is broken up into 12 month period of accounts starting on the first day of the accounts-free period.

Example 1

A Ltd is the ultimate parent of a group but does not produce group accounts because its residence in the Cayman Islands means there is no obligation to do so. A Ltd ceases to be ultimate parent on 1 September 2019.

The accounts-free period will therefore run from 1 April 2017 to 31 August 2019, resulting in the following default periods of account:

  • 1 April 2017 - 31 March 2018 (12 months)
  • 1 April 2018 - 31 March 2019 (12 months)
  • 1 April 2019 - 31 August 2019 (5 months)

Example 2

T Plc has been the ultimate parent of a group since at least 1 April 2017. It has drawn up consolidated financial statements for the group for the year to 31 March 2018.

On 24 August 2018, U Ltd acquires all of the shares in T Plc in a takeover. U Ltd is a member of a different CIR worldwide group whose ultimate parent is V Inc. U Ltd does not draw up consolidated financial statements for a period beginning on 1 April 2018, but draws up single entity financial statements for the period from 1 April 2018 to 31 December 2018 (aligning the end of the period to the date to which its new parent draws up financial statements).

V Inc draws up consolidated financial statements for the years to 31 December 2017 and 31 December 2018.

The T Plc group will have a period of account for the year to 31 March 2018, as the default rule in S480(a) applies (STEP 1 in {CFM95410}).

The T Plc group continues to exist after 31 March 2018, but ceases to exist, as a result of the takeover, on 24 August 2018. But T Plc draws up no financial statements, whether consolidated or single entity, for the period from 1 April 2018 to 23 August 2018.

Accordingly, neither S480(a) nor S484 can apply, and the conditions in S485(1) are satisfied in respect of this period - an accounts-free period. S485(3) deems IAS accounts to have been drawn up for this period which is therefore the final period of account of the T Plc group.

The V Inc group has drawn up consolidated financial statements for the year to 31 December 2017, which would be its period of account, but for the CIR commencement rules which treat the period of account as beginning on 1 April 2017.

The consolidated financial statements determine its next period of account as the year to 31 December 2018, under the default rule in S480(a). This is unaffected by the acquisition of T Plc group, as V Inc is the parent of a worldwide group throughout. The only change is to the composition of the group.

Note that there will be members of both groups whose accounting periods will not coincide with the groups’ periods of account. In making the CIR calculations for these groups, it will be necessary to take into account the disregarded period rules, see for example, as regards tax-interest, CFM95620.  


A company can make an election to alter the default period of account.