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HMRC internal manual

Corporate Finance Manual

Interest restriction: groups, periods and financial statements: period of account: change in the ultimate parent

TIOPA10/S483

The ultimate parent of a worldwide group might draw up financial statements for a period, but only be the ultimate parent of the group for a part of that period.

Where this is the case, those financial statements are ignored and financial statements are instead treated as drawn up in respect of the part of the period where the entity was the ultimate parent. As a result it is this shorter period that is the period of account for the group.

In practice, this is likely to be a relatively unusual scenario, possibly arising in the event of a demerger or spin off of part of a larger worldwide group.

However S483 could also apply where a company is formed to become a new ‘topco’ inserted between the ultimate period of a group (the ‘old group’) and its shareholders and that company draws up consolidated financial statements for a period that begins before it becomes the ultimate parent of the ‘new group’, see CFM98242, which may allow carry forward of unused interest allowance from the old group to the new group.

Example

An entity, Q SA, draws up consolidated financial statements for the period 1 April 2018 to 31 March 2019. It was, however, only a CIR ultimate parent from 1 September 2018 to 31 March 2019.

The Q SA group’s period of account therefore runs from 1 September 2018 to 31 March 2019. The actual financial statements prepared by the group are ignored and the entity is treated as having produced consolidated financial statements for the period 1 September 2018 to 31 March 2019.

The entity must almost inevitably have been a member of some larger group in the period running up to 31 March 2019. The periods of account of that larger group will be determined by its financial statements, applying the rules in S480(a) and S483 to S485 to its fact pattern. In identify those periods of account, the financial statements prepared by Q SA are irrelevant.