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HMRC internal manual

Corporate Finance Manual

Interest restriction: groups, periods and financial statements: financial statements: overview


The financial statements of a worldwide group play an important role in certain calculations necessary under the rules.

In particular, the amounts recognised in the financial statements will be relevant for the calculation of adjusted net group-interest expense needed for the fixed ratio debt cap. They will also be used for the calculation of qualifying net group-interest expense and group-EBITDA figures which drive the group ratio percentage and group ratio debt cap.

References to ‘financial statements’ for a period mean:

  • In the case of a multi-company group, the consolidated financial statements of the ultimate parent and its subsidiaries.
  • In the case of a single-company group, the financial statements of the ultimate parent.

The basic rule is to use the actual financial statements drawn up for the period of account.

However, this is subject to specific provisions to deal with the cases that:

  • Financial statements involve consolidation of the wrong subsidiaries.
  • Financial statements are not acceptable.
  • No financial statements are drawn up.

Consolidated statements not available

Exceptionally, an ultimate parent may prepare consolidated accounts but refuse to make them available even to UK companies within the group. CCMs and other HMRC staff should be prepared to discuss a pragmatic solution with any UK group or sub-group that genuinely finds itself in such a situation