Finance Act 2009 (c. 10)

SCHEDULES

Section 35

SCHEDULE 15 Tax treatment of financing costs and income

Part 1 Introduction

Overview

1 (1) Part 2 contains provision for determining whether this Schedule applies in relation to any particular period of account of the worldwide group.

(2) Part 3 provides for the disallowance of certain financing expenses of relevant group companies arising in a period of account of the worldwide group to which this Schedule applies.

The total of the amounts disallowed is the amount by which the tested expense amount (defined in Part 8) exceeds the available amount (defined in Part 9).

(3) Part 4 provides for the exemption from the charge to corporation tax of certain financing income of UK group companies where financing expenses of relevant group companies have been disallowed under Part 3.

(4) Part 5 provides for the exemption from the charge to corporation tax of certain intra-group financing income of UK group companies where the paying company is denied a deduction for tax purposes otherwise than under this Schedule.

(5) Part 6 contains rules connected with tax avoidance.

(6) Part 7 defines “financing expense amounts” and “financing income amounts” of a company for a period of account of the worldwide group, which are amounts that would, apart from this Schedule, be brought into account for the purposes of corporation tax.

(7) Part 8 defines the “tested expense amount” and the “tested income amount” of the worldwide group for a period of account of the group, which are totals deriving from the financing expense amounts and financing income amounts of certain group companies.

(8) Part 9 defines the “available amount” for a period of account of the worldwide group, which derives from certain financing costs disclosed in the group’s consolidated financial statements.

(9) Part 10 contains further interpretative provisions.

(10) Part 11 contains consequential provision and provision about commencement.

Part 2 Application of this Schedule

Application of Schedule

2 (1) This Schedule applies to any period of account of the worldwide group for which—

(a) the UK net debt of the group (see paragraphs 3 and 4), exceeds

(b) 75% of the worldwide gross debt of the group (see paragraph 5).

(2) But a period of account that is within sub-paragraph (1) is not a period of account to which this Schedule applies if the worldwide group is a qualifying financial services group in that period (see paragraph 7).

(3) The Treasury may by order amend sub-paragraph (1)(b) by substituting a higher or lower percentage for the percentage for the time being specified there.

(4) No order may be made under sub-paragraph (3) unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, the House of Commons.

(5) An order under sub-paragraph (3) may only have effect in relation to periods of account of the worldwide group beginning after the date on which the order is made.

UK net debt of the worldwide group for period of account of worldwide group

3 (1) The reference in paragraph 2 to the “UK net debt” of the worldwide group for a period of account of the group is to the sum of the net debt amounts of each company that was a relevant group company at any time during the period.

(2) In this paragraph “net debt amount”, in relation to a company, means the average of—

(a) the net debt of the company as at that company’s start date, and

(b) the net debt of the company as at that company’s end date.

For the meaning of “net debt”, see paragraph 4.

(3) Where the amount determined in accordance with sub-paragraph (2) is less than £3 million, the net debt amount of the company is nil.

(4) Where a company is dormant (within the meaning given by section 1169 of the Companies Act 2006) at all times in the period beginning with that company’s start date and ending with that company’s end date, the net debt amount of the company is nil.

(5) The Treasury may by order amend sub-paragraph (3) by substituting a higher or lower amount for the amount for the time being specified there.

(6) No order may be made under sub-paragraph (5) unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, the House of Commons.

(7) An order under sub-paragraph (5) may only have effect in relation to periods of account of the worldwide group beginning after the date on which the order is made.

(8) In this Part—

(a) “the start date” of a company means the first day of the period of account of the worldwide group or, if later, the first day in the period on which the company was a relevant group company, and

(b) “the end date” of a company means the last day of the period of account of the worldwide group or, if earlier, the last day in the period on which the company was a relevant group company.

Net debt of a company

4 (1) References in paragraph 3 to the “net debt” of a company as at any date are to—

(a) the sum of the company’s relevant liabilities as at that date, less

(b) the sum of the company’s relevant assets as at that date.

(2) The amount determined in accordance with sub-paragraph (1) may be a negative amount.

(3) For the purposes of this paragraph a company’s “relevant liabilities” as at any date are the amounts that are disclosed in the balance sheet of the company as at that date in respect of—

(a) amounts borrowed (whether by way of overdraft or other short term or long term borrowing),

(b) liabilities in respect of finance leases, or

(c) amounts of such other description as may be specified in regulations made by the Commissioners.

(4) For the purposes of this paragraph a company’s “relevant assets” as at any date are the amounts that are disclosed in the balance sheet of the company as at that date in respect of—

(a) cash and cash equivalents,

(b) amounts loaned (whether by way of overdraft or other short term or long term loan),

(c) net investments, or net cash investments, in finance leases,

(d) securities of Her Majesty’s government or of the government of any other country or territory, or

(e) amounts of such other description as may be specified in regulations made by the Commissioners.

(5) Expressions used in sub-paragraphs (3)(a) and (b) and (4)(a) to (c) have the meaning for the time being given by generally accepted accounting practice.

Worldwide gross debt of worldwide group for period of account of worldwide group

5 (1) The reference in paragraph 2 to the “worldwide gross debt” of the worldwide group for a period of account of the group is to the average of—

(a) the sum of the relevant liabilities of the group as at the day before the first day of the period, and

(b) the sum of the relevant liabilities of the group as at the last day of the period.

(2) For the purposes of this paragraph the “relevant liabilities” of the worldwide group as at any date are the amounts that are disclosed in the balance sheet of the group as at that date in respect of—

(a) amounts borrowed (whether by way of overdraft or other short term or long term borrowing),

(b) liabilities in respect of finance leases, or

(c) amounts of such other description as may be specified in regulations made by the Commissioners.

(3) Expressions used in sub-paragraph (2)(a) and (b) have the meaning for the time being given by the accounting standards in accordance with which the financial statements of the group are drawn up.

(4) For provision about references in this Schedule to financial statements of the worldwide group, and amounts disclosed in financial statements, see paragraphs 87 to 90.

References to amounts disclosed in balance sheet of relevant group company

6 (1) This paragraph applies for the purpose of construing references in paragraph 4 to amounts disclosed in the balance sheet of a relevant group company as at any date (“the relevant date”).

(2) Where the company—

(a) is not a foreign company, and

(b) does not draw up a balance sheet as at the relevant date,

the references are to the amounts that would be disclosed in a balance sheet of the company as at that date, were one drawn up in accordance with generally accepted accounting practice.

(3) Where the company—

(a) is a foreign company, and

(b) draws up a balance sheet (“a UK permanent establishment balance sheet”) as at the relevant date in respect of the company’s permanent establishment in the United Kingdom that treats the establishment as a distinct and separate enterprise,

the references are to amounts in that balance sheet.

(4) Where the company—

(a) is a foreign company, and

(b) does not draw up a UK permanent establishment balance sheet as at the relevant date,

the references are to the amounts that would be disclosed in a UK permanent establishment balance sheet as at that date, were one drawn up in accordance with generally accepted accounting practice.

(5) For the purposes of this paragraph a relevant group company is a “foreign company” if it is not resident in the United Kingdom and is carrying on a trade in the United Kingdom through a permanent establishment in the United Kingdom.

Qualifying financial services groups

7 (1) The worldwide group is a qualifying financial services group in a period of account if the trading income condition—

(a) is met in relation to that period, or

(b) is not met in relation to that period, but only because of losses incurred by the group in respect of activities that are normally reported on a net basis in financial statements prepared in accordance with international accounting standards.

(2) The trading income condition is met in relation to a period of account if—

(a) all or substantially all of the UK trading income of the worldwide group for that period, or

(b) all or substantially all of the worldwide trading income of the worldwide group for that period,

is derived from qualifying activities (see paragraph 8).

(3) In this Part, in relation to a period of account of the worldwide group—

• “UK trading income” means the sum of the trading income for that period of each company that was a relevant group company at any time during that period (see paragraph 12);

• “worldwide trading income” means the trading income for that period of the worldwide group (see paragraph 13).

Qualifying activities

8 In this Part “qualifying activities” means—

(a) lending activities and activities that are ancillary to lending activities (see paragraph 9),

(b) insurance activities and insurance-related activities (see paragraph 10), and

(c) relevant dealing in financial instruments (see paragraph 11).

Lending activities and activities ancillary to lending activities

9 (1) In this Part “lending activities” means any of the following activities—

(a) acceptance of deposits or other repayable funds;

(b) lending of money, including consumer credit, mortgage credit, factoring (with or without recourse) and financing of commercial transactions (including forfeiting);

(c) finance leasing (as lessor);

(d) issuing and administering means of payment;

(e) provision of guarantees or commitments to provide money;

(f) money transmission services;

(g) provision of alternative finance arrangements;

(h) other activities carried out in connection with activities falling within any of paragraphs (a) to (g).

(2) Activities that are ancillary to lending activities are not qualifying activities for the purposes of this Part if the income derived from the ancillary activities forms a significant part of the total of—

(a) that income, and

(b) the income derived from lending activities of the worldwide group in the period of account.

(3) In sub-paragraph (2) “income” means the gross income or net income that would be taken into account for the purposes of paragraph 7 in calculating the UK or worldwide trading income of the worldwide group for the period of account.

(4) The Commissioners may by order—

(a) amend sub-paragraph (1), and

(b) make other amendments of this paragraph in consequence of any amendment of sub-paragraph (1).

(5) In sub-paragraph (1)(h), and in the references to ancillary activities in this paragraph and paragraph 8(a), “activities” includes buying, holding, managing and selling assets.

(6) In this paragraph “alternative finance arrangements” has the same meaning as in Chapter 6 of Part 6 of CTA 2009.

Insurance activities and insurance related activities

10 (1) In this Part “insurance activities” means—

(a) the effecting or carrying out of contracts of insurance by a regulated insurer, and

(b) investment business that arises directly from activities falling within paragraph (a).

(2) In this Part “insurance-related activities” means—

(a) activities that are ancillary to insurance activities, and

(b) activities that—

(i) are of the same kind as activities carried out for the purposes of insurance activities,

(ii) are not actually carried out for those purposes, and

(iii) would not be carried out but for insurance activities being carried out.

(3) Sub-paragraph (2) is subject to sub-paragraph (4).

(4) Activities that fall within sub-paragraph (2)(a) or (b) (“the relevant activities”) are not insurance-related activities if the income derived from the relevant activities forms a significant part of the total of—

(a) that income, and

(b) the income derived from insurance activities of the worldwide group in the period of account.

(5) In sub-paragraph (4) “income” means the gross income or net income that would be taken into account for the purposes of paragraph 7 in calculating the UK or worldwide trading income of the worldwide group for the period of account.

(6) In this paragraph—

• “activities” includes buying, holding, managing and selling assets;

• “contract of insurance” has the same meaning as in Chapter 1 of Part 12 of ICTA;

• “regulated insurer” means a member of the worldwide group that—

  (a)

  is authorised under the law of any territory to carry on insurance business, or

  (b)

  is a member of a body or organisation that is so authorised.

Relevant dealing in financial instruments

11 (1) In this Part “financial instrument” means anything that is a financial instrument for any purpose of the FSA Handbook.

(2) For the purposes of this Part, a dealing in a financial instrument is a “relevant dealing” if—

(a) it is a dealing other than in the capacity of a broker, and

(b) profits or losses on the dealing form part of the trading profits or losses of a business.

(3) In this paragraph “broker” includes any person offering to sell securities to, or purchase securities from, members of the public generally.

UK trading income of the worldwide group

12 (1) This paragraph applies in relation to paragraph 7 for calculating the UK trading income of the worldwide group for a period of account.

(2) The trading income for that period of a relevant group company is the aggregate of—

(a) the gross income calculated in accordance with sub-paragraph (3), and

(b) the net income calculated in accordance with sub-paragraph (4).

(3) The income referred to in sub-paragraph (2)(a) is the gross income—

(a) arising from the activities of the relevant group company (other than net-basis activities), and

(b) accounted for as such under generally accepted accounting practice,

without taking account of any deductions (whether for expenses or otherwise).

(4) The income referred to in sub-paragraph (2)(b) is the net income arising from the net-basis activities of the relevant group company that—

(a) is accounted for as such under generally accepted accounting practice, or

(b) would be accounted for as such if income arising from such activities were accounted for under generally accepted accounting practice.

(5) Sub-paragraphs (3) and (4) are subject to sub-paragraph (6).

(6) In a case where a proportion of an accounting period of a relevant group company does not fall within the period of account of the worldwide group, the gross income or net income for that accounting period of the company is to be reduced, for the purposes of this paragraph, by that proportion.

(7) Gross income or net income is to be disregarded for the purposes of sub-paragraph (2) if the income arises in respect of an amount payable by another member of the worldwide group that is either a UK group company or a relevant group company.

(8) In this paragraph “net-basis activity” means activity that is normally reported on a net basis in financial statements prepared in accordance with generally accepted accounting practice.

Worldwide trading income of the worldwide group

13 (1) This paragraph applies in relation to paragraph 7 for calculating the worldwide trading income of the worldwide group for a period of account.

(2) The trading income for that period of the worldwide group is the aggregate of—

(a) the gross income calculated in accordance with sub-paragraph (3), and

(b) the net income calculated in accordance with sub-paragraph (4).

(3) The income referred to in sub-paragraph (2)(a) is the gross income—

(a) arising from the activities of worldwide group (other than net-basis activities), and

(b) disclosed as such in the financial statements of the worldwide group,

without taking account of any deductions (whether for expenses or otherwise).

(4) The income referred to in sub-paragraph (2)(b) is the net income arising from the net-basis activities of the worldwide group that—

(a) is accounted for as such under international accounting standards, or

(b) would be accounted for as such if income arising from such activities were accounted for under international accounting standards.

(5) In this paragraph “net-basis activity” means activity that is normally reported on a net basis in financial statements prepared in accordance with international accounting standards.

(6) For provision about references in this Schedule to financial statements of the worldwide group, and amounts disclosed in financial statements, see paragraphs 87 to 90.

Foreign currency accounting

14 (1) Subject to the following provisions of this paragraph, references in this Part to an amount disclosed in a balance sheet of a relevant group company, or of the worldwide group, as at any date are, where the amount is expressed in a currency other than sterling, to that amount translated into its sterling equivalent, translated by reference to the spot rate of exchange for that date.

(2) Sub-paragraph (3) applies in relation to a period of account of the worldwide group if all the amounts disclosed in balance sheets (whether of relevant group companies, or of the worldwide group) that are relevant to a calculation under this Part in relation to that period are expressed in the same currency (“the relevant foreign currency”) and that currency is not sterling.

(3) Where this sub-paragraph applies—

(a) references in this Schedule to an amount disclosed in a balance sheet of a relevant group company, or of the worldwide group, are to that amount expressed in the relevant foreign currency, and

(b) for the purposes of determining under paragraph 3 the net debt amount of a company, the reference in sub-paragraph (3) of that paragraph to £3 million is to be read as a reference to the relevant amount.

(4) For this purpose “the relevant amount” means the average of—

(a) £3 million expressed in the relevant foreign currency, translated by reference to the spot rate of exchange for the company’s start date, and

(b) £3 million expressed in the relevant foreign currency, translated by reference to the spot rate of exchange for the company’s end date.

Part 3 Disallowance of deductions

Application of Part and meaning of “total disallowed amount”

15 (1) This Part applies where, for a period of account of the worldwide group to which this Schedule applies (“the relevant period of account”)—

(a) the tested expense amount (see Part 8), exceeds

(b) the available amount (see Part 9).

(2) In this Part “the total disallowed amount” means the difference between the amounts referred to in paragraphs (a) and (b) of sub-paragraph (1).

Meaning of “company to which this Part applies”

16 References in this Part to a company to which this Part applies are to a company that is a relevant group company at any time during the relevant period of account.

Appointment of authorised company for relevant period of account

17 (1) The companies to which this Part applies may appoint one of their number to exercise functions conferred under this Part on the reporting body in relation to the relevant period of account.

(2) An appointment under this paragraph is of no effect unless it is signed on behalf of each company to which this Part applies by the appropriate person.

(3) The Commissioners may by regulations make further provision about an appointment under this paragraph including, in particular, provision—

(a) about the form and manner in which an appointment may be made,

(b) about how an appointment may be revoked and the form and manner of such revocation,

(c) requiring a person to notify HMRC of the making or revocation of an appointment and about the form and manner of such notification,

(d) requiring a person to give information to HMRC in connection with the making or revocation of an appointment,

(e) imposing time limits in relation to making or revoking an appointment,

(f) providing that an appointment or its revocation is of no effect, or ceases to have effect, if time limits or other requirements under the regulations are not met, and

(g) about cases where a company is not a relevant group company at all times during the relevant period of account.

(4) In this paragraph “the appropriate person”, in relation to a company, means—

(a) the proper officer of the company, or

(b) such other person as may for the time being have the express, implied or apparent authority of the company to act on its behalf for the purposes of this Schedule.

(5) Subsections (3) and (4) of section 108 of TMA 1970 (responsibility of company officers: meaning of “proper officer”) apply for the purposes of this paragraph as they apply for the purposes of that section.

Meaning of “the reporting body”

18 In this Part “the reporting body” means—

(a) in a case in which an appointment under paragraph 17 has effect in relation to the relevant period of account, the company appointed under that paragraph, and

(b) in a case in which such an appointment does not have effect in relation to the relevant period of account, the companies to which this Part applies, acting jointly.

Statement of allocated disallowances: submission

19 (1) The reporting body must submit a statement (a “statement of allocated disallowances”) in relation to the relevant period of account to HMRC.

(2) A statement submitted under this paragraph must be received by HMRC within 12 months of the end of the relevant period of account.

(3) A statement submitted under this paragraph must comply with the requirements of paragraph 21.

Statement of allocated disallowances: submission of revised statement

20 (1) Where the reporting body has submitted a statement of allocated disallowances under paragraph 19 or this paragraph, it may submit a revised statement to HMRC.

(2) A statement submitted under this paragraph must be received by HMRC within 36 months of the end of the relevant period of account.

(3) A statement submitted under this paragraph must comply with the requirements of paragraph 21.

(4) A statement submitted under this paragraph—

(a) must indicate the respects in which it differs from the previous statement, and

(b) supersedes the previous statement.

Statement of allocated disallowances: requirements

21 (1) This paragraph applies in relation to a statement of allocated disallowances submitted under paragraph 19 or 20.

(2) The statement must be signed—

(a) in a case in which an appointment under paragraph 17 has effect in relation to the relevant period of account, by the appropriate person in relation to the company appointed under that paragraph, or

(b) in a case in which such an appointment does not have effect in relation to the relevant period of account, by the appropriate person in relation to each company to which this Part applies.

(3) The statement must show—

(a) the tested expense amount,

(b) the available amount, and

(c) the total disallowed amount.

(4) The statement must—

(a) list one or more companies to which this Part applies, and

(b) in relation to each listed company, specify one or more financing expense amounts for the relevant period of account that are to be disallowed, and give the relevant details in relation to each such amount.

(5) For this purpose “the relevant details”, in relation to a financing expense amount, are—

(a) which of conditions A, B or C in paragraph 54 is met in relation to the amount, and

(b) the relevant accounting period of the company in which the amount would, apart from this Schedule, be brought into account for the purposes of corporation tax.

(6) The sum of the amounts specified under sub-paragraph (4)(b) must equal the total disallowed amount.

(7) In this paragraph “the appropriate person”, in relation to a company, means—

(a) the proper officer of the company, or

(b) such other person as may for the time being have the express, implied or apparent authority of the company to act on its behalf for the purposes of this Schedule.

(8) Subsections (3) and (4) of section 108 of TMA 1970 (responsibility of company officers: meaning of “proper officer”) apply for the purposes of this paragraph as they apply for the purposes of that section.

(9) For the meaning of “financing expense amount”, see Part 7.

Statement of allocated disallowances: effect

22 A financing expense amount of a company to which this Part applies that is specified in a statement of allocated disallowances under paragraph 21(4)(b) is not to be brought into account by the company for the purposes of corporation tax.

Company tax returns

23 (1) This paragraph applies where—

(a) a company to which this Part applies has delivered a company tax return for a relevant accounting period, and

(b) as a result of the submission of a revised statement of allocated disallowances under paragraph 20—

(i) there is a change in the amount of profits on which corporation tax is chargeable for the period, or

(ii) any other information contained in the return is incorrect.

(2) The company is treated as having amended its company tax return for the accounting period so as to reflect the change mentioned in sub-paragraph (1)(b)(i) or to correct the information mentioned in sub-paragraph (1)(b)(ii).

Power to make regulations about statement of allocated disallowances

24 The Commissioners may by regulations make further provision about a statement of allocated disallowances including, in particular, provision—

(a) about the form of a statement and the manner in which it is to be submitted,

(b) requiring a person to give information to HMRC in connection with a statement,

(c) as to circumstances in which a statement that is not received by the time specified in paragraph 19(2) or 20(2) is to be treated as if it were so received, and

(d) as to circumstances in which a statement that does not comply with the requirements of paragraph 21 is to be treated as if it did so comply.

Failure of reporting body to submit statement of allocated disallowances

25 (1) This paragraph applies if no statement of allocated disallowances is submitted under paragraph 19 that complies with the requirements of paragraph 21.

(2) Each company to which this Part applies that has a net financing deduction for the relevant period of account that is greater than nil must reduce the amounts that it brings into account in relevant accounting periods in respect of financing expense amounts.

(3) The total of the reductions required to be made by a company by virtue of sub-paragraph (2) is—

where—

• NFD is the net financing deduction of the company for the relevant period of account (see paragraph 70(2)),

• TEA is the tested expense amount for the relevant period of account (see paragraph 70(1)), and

• TDA is the total disallowed amount (see paragraph 15(2)).

(4) The particular financing expense amounts that must be reduced, and the amounts by which they must be reduced, must be determined in accordance with regulations made by the Commissioners.

(5) Regulations under this paragraph may, in particular, include provision—

(a) conferring a discretion on a company required to make reductions under this paragraph as to the particular financing expense amounts that are to be reduced,

(b) requiring a company required to make reductions under this paragraph to notify another relevant group company of the particular reductions made, and

(c) as to the times by which such notices must be sent and as to information that must accompany such notices.

Powers to make regulations in relation to reductions required under paragraph 25

26 (1) The Commissioners may by regulations make provision for the purpose of securing that a company required under paragraph 25 to reduce the amounts that it brings into account in respect of financing expense amounts for the relevant period of account (“a company required to make default reductions”) has sufficient information to determine their amount.

(2) Provision that may be made in regulations under sub-paragraph (1) includes provision requiring one or more members of the worldwide group to send specified information to a company required to make default reductions.

(3) The Commissioners may by regulations make provision about cases in which (whether as a result of non-compliance with regulations made under sub-paragraph (1) or otherwise) a company required to make default reductions does not possess specified information.

(4) Provision that may be made in regulations under sub-paragraph (3) includes provision as to assumptions that may or must be made in determining the amount of a reduction under paragraph 25 of a financing expense amount.

(5) The Commissioners may by regulations make provision for determining a time later than that determined under paragraph 15(4) of Schedule 18 to FA 1998 (amendment of return by company) before which a company required to make default reductions may amend its company tax return so as to reflect a reduction under paragraph 25.

(6) In this paragraph “specified” means specified in regulations under this paragraph.

Part 4 Exemption of financing income

Application of Part and meaning of “total disallowed amount”

27 (1) This Part applies where, for a period of account of the worldwide group to which this Schedule applies (“the relevant period of account”)—

(a) the tested expense amount (see Part 8), exceeds

(b) the available amount (see Part 9).

(2) In this Part the “total disallowed amount” means the difference between the amounts referred to in paragraphs (a) and (b) of sub-paragraph (1).

Meaning of “company to which this Part applies”

28 References in this Part to a company to which this Part applies are to a company that is a UK group company at any time during the relevant period of account.

Appointment of authorised company for relevant period of account

29 (1) The companies to which this Part applies may appoint one of their number to exercise functions conferred under this Part on the reporting body in relation to the relevant period of account.

(2) An appointment under this paragraph is of no effect unless it is signed on behalf of each company to which this Part applies by the appropriate person.

(3) The Commissioners may by regulations make further provision about an appointment under this paragraph including, in particular, provision—

(a) about the form and manner in which an appointment may be made or revoked,

(b) requiring a person to notify HMRC of the making or revocation of an appointment and about the form and manner of such notification,

(c) requiring a person to give information to HMRC in connection with the making or revocation of an appointment,

(d) imposing time limits in relation to making or revoking an appointment,

(e) that an appointment or its revocation is of no effect, or ceases to have effect, if time limits or other requirements under the regulations are not met, and

(f) about cases where a company does not meet condition A in paragraph 86, or is not a member of the worldwide group, at all times during the relevant period of account.

(4) In this paragraph “the appropriate person”, in relation to a company, means—

(a) the proper officer of the company, or

(b) such other person as may for the time being have the express, implied or apparent authority of the company to act on its behalf for the purposes of this Schedule.

(5) Subsections (3) and (4) of section 108 of TMA 1970 (responsibility of company officers: meaning of “proper officer”) apply for the purposes of this paragraph as they apply for the purposes of that section.

Meaning of “the reporting body”

30 In this Part “the reporting body” means—

(a) in a case in which an appointment under paragraph 29 has effect in relation to the relevant period of account, the company appointed under that paragraph, and

(b) in a case in which such an appointment does not have effect in relation to the relevant period of account, the companies to which this Part applies, acting jointly.

Statement of allocated exemptions: submission

31 (1) The reporting body must submit a statement (a “statement of allocated exemptions”) in relation to the relevant period of account to HMRC.

(2) A statement submitted under this paragraph must be received by HMRC within 12 months of the end of the relevant period of account.

(3) A statement submitted under this paragraph must comply with the requirements of paragraph 33.

Statement of allocated exemptions: submission of revised statement

32 (1) Where the reporting body has submitted a statement of allocated exemptions under paragraph 31 or this paragraph, it may submit a revised statement to HMRC.

(2) A statement submitted under this paragraph must be received by HMRC within 36 months of the end of the relevant period of account.

(3) A statement submitted under this paragraph must comply with the requirements of paragraph 33.

(4) A statement submitted under this paragraph—

(a) must indicate the respects in which it differs from the previous statement, and

(b) supersedes the previous statement.

Statement of allocated exemptions: requirements

33 (1) This paragraph applies in relation to a statement of allocated exemptions submitted under paragraph 31 or 32.

(2) The statement must be signed—

(a) in a case in which an appointment under paragraph 29 has effect in relation to the relevant period of account, by the appropriate person in relation to the company appointed under that paragraph, or

(b) in a case in which such an appointment does not have effect in relation to the relevant period of account, by the appropriate person in relation to each company to which this Part applies.

(3) The statement must show—

(a) the tested expense amount,

(b) the available amount, and

(c) the total disallowed amount.

(4) The statement must—

(a) list one or more companies to which this Part applies, and

(b) in relation to each listed company, specify one or more financing income amounts for the relevant period of account that are to be exempted, and give the relevant details in relation to each such amount.

(5) For this purpose “the relevant details”, in relation to a financing income amount, are—

(a) which of conditions A, B or C in paragraph 55 is met in relation to the amount, and

(b) the relevant accounting period of the company in which the amount would, apart from this Schedule, be brought into account for the purposes of corporation tax.

(6) The sum of the amounts specified under sub-paragraph (4)(b) must not exceed the lower of—

(a) total disallowed amount, and

(b) the tested income amount (see Part 8).

(7) In this paragraph “the appropriate person”, in relation to a company, means—

(a) the proper officer of the company, or

(b) such other person as may for the time being have the express, implied or apparent authority of the company to act on its behalf for the purposes of this Schedule.

(8) Subsections (3) and (4) of section 108 of TMA 1970 (responsibility of company officers: meaning of “proper officer”) apply for the purposes of this paragraph as they apply for the purposes of that section.

(9) For the meaning of “financing income amount”, see Part 7.

Statement of allocated exemptions: effect

34 A financing income amount of a company to which this Part applies that is specified in a statement of allocated exemptions under paragraph 33(4)(b) is not to be brought into account by the company for the purposes of corporation tax.

Company tax returns

35 (1) This paragraph applies where—

(a) a company to which this Part applies has delivered a company tax return for a relevant accounting period, and

(b) as a result of the submission of a revised statement of allocated exemptions under paragraph 32—

(i) there is a change in the amount of profits on which corporation tax is chargeable for the period, or

(ii) any other information contained in the return is incorrect.

(2) The company is treated as having amended its company tax return for the accounting period so as to reflect the change mentioned in sub-paragraph (1)(b)(i) or to correct the information mentioned in sub-paragraph (1)(b)(ii).

Power to make regulations about statement of allocated exemptions

36 The Commissioners may by regulations make further provision about a statement of allocated exemptions including, in particular, provision—

(a) about the form of a statement and the manner in which it is to be submitted,

(b) requiring a person to give information to HMRC in connection with a statement,

(c) as to circumstances in which a statement that is not received by the time specified in paragraph 31(2) or 32(2) is to be treated as if it were so received, and

(d) as to circumstances in which a statement that does not comply with the requirements of paragraph 33 is to be treated as if it did so comply.

Failure of reporting body to submit statement of allocated exemptions

37 (1) This paragraph applies if no statement of allocated exemptions is submitted under paragraph 31 that complies with the requirements of paragraph 33.

(2) Subject to the following provisions of this paragraph, each financing income amount for the relevant period of account of each company to which this Part applies is to be reduced to nil.

(3) In this paragraph “unrestricted reduction” means a reduction of a financing income amount for the relevant period of account of a company to which this Part applies, determined in accordance with sub-paragraph (2).

(4) Sub-paragraph (5) applies if—

(a) the total of the unrestricted reductions, exceeds

(b) the lower of—

(i) the total disallowed amount, and

(ii) the tested income amount.

(5) Each unrestricted reduction is to be reduced by—

where—

• UR is the unrestricted reduction in question,

• TUR is the total of the unrestricted reductions, and

• X is the excess mentioned in sub-paragraph (4).

Power to make regulations in relation to reductions required under paragraph 37

38 (1) The Commissioners may by regulations make provision for the purpose of securing that a company required under paragraph 37 to reduce the amounts that it brings into account in respect of financing income amounts for the relevant period of account (“a company required to make default reductions”) has sufficient information to determine their amount.

(2) Provision that may be made in regulations under sub-paragraph (1) includes provision requiring one or more members of the worldwide group to send specified information to a company required to make default reductions.

(3) The Commissioners may by regulations make provision about cases in which (whether as a result of non-compliance with regulations made under sub-paragraph (1) or otherwise) a company required to make default reductions does not possess specified information.

(4) Provision that may be made in regulations under sub-paragraph (3) includes provision as to assumptions that may or must be made in determining the amount of a reduction under paragraph 37 of a financing income amount.

(5) The Commissioners may by regulations make provision for determining a time later than that determined under paragraph 15(4) of Schedule 18 to FA 1998 (amendment of return by company) before which a company required to make default reductions may amend its company tax return so as to reflect a reduction under paragraph 37.

(6) In this paragraph “specified” means specified in regulations under this paragraph.

Balancing payments between group companies: no charge to, or relief from, tax

39 (1) This paragraph applies where—

(a) one or more financing income amounts of a company (“company A”) for the relevant period of account are—

(i) by virtue of paragraph 34, not brought into account, or

(ii) by virtue of paragraph 37, reduced,

(b) one or more financing expense amounts of another company (“company B”) for the relevant period of account are—

(i) by virtue of paragraph 22, not brought into account, or

(ii) by virtue of paragraph 25, reduced,

(c) company A makes one or more payments (“the balancing payments”) to company B, and

(d) the sole or main reason for making the balancing payments is that the conditions in paragraphs (a) and (b) are met.

(2) To the extent that the sum of the balancing payments does not exceed the amount specified in sub-paragraph (3), those payments—

(a) are not to be taken into account in computing profits or losses of either company A or company B for the purposes of corporation tax, and

(b) are not to be regarded as distributions for any of the purposes of the Corporation Tax Acts.

(3) The amount referred to in sub-paragraph (2) is the lower of—

(a) the sum of the financing income amounts mentioned in sub-paragraph (1)(a), and

(b) the sum of the financing expense amounts mentioned in sub-paragraph (1)(b).

Part 5 Intra-group financing income where payer denied deduction

Exemption from tax for certain financing income received from certain EEA companies

40 (1) A financing income amount of a company that is a member of the worldwide group (“the recipient”) is not to be brought into account for the purposes of corporation tax if—

(a) it arises as a result of a payment by another company that is a member of the worldwide group (“the payer”),

(b) the payment is received during a period of account of the worldwide group to which this Schedule applies, and

(c) conditions A, B and C are met.

(2) Condition A is that, at the time the payment is received, the payer is a relevant associate of the recipient (see paragraph 41).

(3) Condition B is that, at the time the payment is received—

(a) the payer is tax-resident in an EEA territory (see paragraph 42), and

(b) the payer is liable to a tax of that territory that is chargeable by reference to profits, income or gains arising to the payer.

(4) Condition C is that—

(a) qualifying EEA tax relief for the payment is not available to the payer in the period in which the payment is made (“the current period”) or any previous period (see paragraph 43), and

(b) qualifying EEA tax relief for the payment is not available to the payer in any period after the current period (see paragraph 44).

(5) For the meaning of “financing income amount”, see paragraph 46.

Meaning of “relevant associate”

41 For the purposes of this Part the payer is a “relevant associate” of the recipient if—

(a) the payer is a parent of the recipient,

(b) the payer is a 75% subsidiary of the recipient, or

(c) the payer is a 75% subsidiary of a parent of the recipient.

Meaning of “tax-resident” and “EEA territory”

42 (1) For the purposes of this Part the payer is “tax-resident” in a territory if it is liable, under the law of that territory, to tax by reason of domicile, residence or place of management.

(2) In this Part “EEA territory” means a territory outside the United Kingdom that is within the European Economic Area.

Qualifying EEA tax relief for payment in the current period or a previous period

43 (1) For the purposes of this Part qualifying EEA tax relief for a payment is not available to the payer in the current period or a previous period if conditions A and B are met in relation to the payment.

(2) Condition A is that no deduction calculated by reference to the payment can be taken into account in calculating any profits, income or gains that—

(a) arise to the payer in the current period or any previous period, and

(b) are chargeable to any tax of the United Kingdom or an EEA territory for the current period or any previous period.

(3) Condition B is that no relief determined by reference to the payment can be given in the current period or any previous period for the purposes of any tax of the United Kingdom or an EEA territory by—

(a) the payment of a credit,

(b) the elimination or reduction of a tax liability, or

(c) any other means of any kind.

(4) Conditions A and B are not met in relation to the payment unless every step is taken (whether by the payer or any other person) to secure that deductions are taken into account as mentioned in sub-paragraph (2) and reliefs are given as mentioned in sub-paragraph (3).

(5) Conditions A and B are not met in relation to the payment unless they would be met disregarding a failure to obtain a deduction or relief by virtue of—

(a) this Schedule, or

(b) provision made as a result of double taxation arrangements between any two territories (including provision sanctioned by associated enterprise rules contained in such arrangements).

(6) For this purpose—

(a) arrangements are “double taxation arrangements” if they are arrangements made between any two territories with a view to affording relief from double taxation, and

(b) “associated enterprise rules” means —

(i) rules that, on the passing of this Act, were contained in Article 9 of the Model Tax Convention on Income and on Capital published by the Organisation for Economic Co-operation and Development, or

(ii) any rules in the same or equivalent terms.

Qualifying EEA tax relief for payment in future period

44 (1) For the purposes of this Part qualifying EEA tax relief for a payment is not available to the payer in a period after the current period if conditions A and B are met in relation to the payment.

(2) Condition A is that no deduction calculated by reference to the payment can be taken into account in calculating any profits, income or gains that—

(a) might arise to the payer in any period after the current period, and

(b) would, if they did so arise, be chargeable to any tax of the United Kingdom or an EEA territory for any period after the current period.

(3) Condition B is that no relief determined by reference to the payment can be given in any period after the current period for the purposes of any tax of the United Kingdom or an EEA territory by—

(a) the payment of a credit,

(b) the elimination or reduction of a tax liability, or

(c) any other means of any kind.

(4) The question whether a deduction can be taken into account as mentioned in sub-paragraph (2) or a relief can be given as mentioned in sub-paragraph (3), is to be determined by reference to the position immediately after the end of the current period.

(5) Conditions A and B are not met in relation to the payment unless they would be met disregarding a failure to obtain a deduction or relief by virtue of—

(a) this Schedule, or

(b) provision made as a result of double taxation arrangements between any two territories (including provision sanctioned by associated enterprise rules contained in such arrangements).

(6) For this purpose—

(a) arrangements are “double taxation arrangements” if they are arrangements made between any two territories with a view to affording relief from double taxation, and

(b) “associated enterprise rules” means—

(i) rules that, on the passing of this Act, were contained in Article 9 of the Model Tax Convention on Income and on Capital published by the Organisation for Economic Co-operation and Development, or

(ii) any rules in the same or equivalent terms.

References to tax of a territory

45 (1) References in this Part to a tax of the United Kingdom are to income tax or corporation tax.

(2) References in this Part to a tax of a territory outside the United Kingdom are to a tax chargeable under the law of that territory that—

(a) is charged on income and corresponds to United Kingdom income tax, or

(b) is charged on income or chargeable gains or both and corresponds to United Kingdom corporation tax.

(3) For the purposes of this paragraph a tax chargeable under the law of a territory outside the United Kingdom does not fail to correspond to income or corporation tax just because—

(a) it is chargeable under the law of a province, state or other part of a country, or

(b) it is levied by or on behalf of a municipality or other local body.

Financing income amounts of a company

46 (1) References in this Part to a “financing income amount” of a company are (subject to sub-paragraph (6)) to any amount that meets condition A, B or C.

(2) Condition A is that the amount is a credit that—

(a) would, apart from this Part, be brought into account by the company for the purposes of corporation tax,

(b) would be so brought into account in respect of a loan relationship—

(i) under Part 3 of CTA 2009 by virtue of section 297 of that Act (loan relationships for purposes of trade), or

(ii) under Part 5 of that Act (other loan relationships), and

(c) is not an excluded credit.

(3) A credit is “excluded” if it is in respect of—

(a) the reversal of an impairment loss,

(b) an exchange gain, or

(c) a profit from a related transaction.

(4) Condition B is that the amount is an amount that would, apart from this Part, be brought into account by the company for the purposes of corporation tax in respect of the financing income implicit in amounts received under finance leases.

(5) Condition C is that the amount is an amount that would, apart from this Part, be brought into account by the company for the purposes of corporation tax in respect of the financing income receivable on debt factoring, or any similar transaction.

(6) The provisions of Part 7 apply in relation to an amount that is a financing income amount of a company by virtue of meeting condition A, B or C in this paragraph as they apply in relation to an amount that is a financing income amount of a relevant group company by virtue of meeting condition A, B or C in paragraph 55.

Part 6 Anti-avoidance

Schemes involving manipulation of rules in Part 2

47 (1) A period of account of the worldwide group that, apart from this paragraph, is not within paragraph 2(1) is treated as within that provision if conditions A to C are met.

(2) Condition A is that—

(a) at any time before the end of the period, a scheme is entered into, and

(b) if the scheme had not been entered into, the period would have been within paragraph 2(1).

(3) Condition B is that the main purpose, or one of the main purposes, of any party to the scheme on entering into the scheme is to secure that the period is not within paragraph 2(1).

(4) Condition C is that the scheme is not an excluded scheme.

Schemes involving manipulation of rules in Parts 3 and 4

48 (1) Where conditions A to C are met in relation to a period of account of the worldwide group (“the relevant period of account”), the tested expense amount, the tested income amount and the available amount for the period are to be calculated in accordance with paragraph 50.

(2) Condition A is that—

(a) at any time before the end of the relevant period of account, a scheme is entered into, and

(b) the main purpose, or one of the main purposes, of any party to the scheme on entering into it is to secure that the amount of the relevant net deduction (within the meaning given by paragraph 49) is lower than it would be if that amount were calculated in accordance with paragraph 50.

(3) Condition B is that a result of the scheme is that—

(a) the sum of the profits of UK group companies that arise in relevant accounting periods and that are chargeable to corporation tax is less than it would be if that sum were determined in accordance with paragraph 50, or

(b) the sum of the losses of UK group companies that arise in relevant accounting periods (other than any taken into account in calculating profits within paragraph (a)) and that are capable of being a carried-back amount or a carried-forward amount is higher than it would be if that sum were determined in accordance with paragraph 50.

(4) Condition C is that the scheme is not an excluded scheme.

(5) In a case where—

(a) a profit or loss arises in an accounting period of a UK group company, and

(b) a proportion of that period does not fall within the relevant period of account,

the profit or loss is to be reduced, for the purposes of condition B, by the same proportion.

Meaning of “relevant net deduction”

49 (1) In paragraph 48(2) the “relevant net deduction” means—

(a) the amount by which the total disallowed amount exceeds the tested income amount, or

(b) if the total disallowed amount does not exceed the tested income amount, nil.

(2) In this paragraph the “total disallowed amount” means—

(a) the amount by which the tested expense amount exceeds the available amount, or

(b) if the tested expense amount does not exceed the available amount, nil.

Calculation of amounts

50 (1) References in paragraph 48 to the calculation of any amount or sum in accordance with this paragraph are to the calculation of that amount or sum on the following assumptions.

(2) The assumptions are that—

(a) the scheme in question was not entered into, and

(b) instead, anything that it is more likely than not would have been done or not done, had this Schedule not had effect in relation to the relevant period of account, was done or not done.

Meaning of “carried-back amount” and “carried-forward amount”

51 (1) In paragraph 48 “carried-back amount” means—

(a) an amount carried back under section 393A(1)(b) of ICTA (trading losses),

(b) an amount carried back by virtue of a claim under section 459(1)(b) of CTA 2009 (non-trading deficits from loan relationships), or

(c) an amount carried back under section 389(2) of CTA 2009 (deficits of insurance companies).

(2) In paragraph 48 “carried-forward amount” means—

(a) an amount carried forward under section 76(12) or (13) of ICTA (certain expenses of insurance companies),

(b) an amount carried forward under section 392A(2) or (3) of ICTA (UK property business losses),

(c) an amount carried forward under section 392B(1)(b) of ICTA (overseas property business losses),

(d) an amount carried forward under section 393(1) of ICTA (trading losses),

(e) an amount carried forward under section 396(1) of ICTA (losses from miscellaneous transactions),

(f) an amount carried forward under section 436A(4) of ICTA (insurance companies: losses from gross roll-up business),

(g) an amount carried forward under section 8(1)(b) of TCGA 1992 (allowable losses),

(h) an amount carried forward under section 391(2) of CTA 2009 (deficits of insurance companies),

(i) an amount carried forward under section 457(3) of CTA 2009 (non-trading deficits from loan relationships),

(j) an amount carried forward under section 753(3) of CTA 2009 (non-trading loss on intangible fixed assets),

(k) an amount carried forward under section 925(3) of CTA 2009 (patent income: relief for expenses), or

(l) an amount carried forward under section 1223 of CTA 2009 (expenses of management and other amounts).

Schemes involving manipulation of rules in Part 5

52 (1) This paragraph applies to a financing income amount of a company received during a period of account of the worldwide group if—

(a) apart from this paragraph, the financing income amount would, by virtue of paragraph 40, not be brought into account for the purposes of corporation tax, and

(b) conditions A to C are met.

(2) Condition A is that, at any time before the financing income amount is received, a scheme is entered into that secures that any of the conditions in sub-paragraphs (2) to (4) of paragraph 40 (“the relevant paragraph 40 condition”) is met in relation to the amount.

(3) Condition B is that the purpose, or one of the main purposes, of any party to the scheme on entering into the scheme is to secure that the relevant paragraph 40 condition is met.

(4) Condition C is that the scheme is not an excluded scheme.

(5) Where this paragraph applies to a financing income amount, the relevant paragraph 40 condition is treated as not met in relation to the amount.

(6) Paragraph 46 (meaning of references to a “financing income amount” of a company) applies for the purposes of this paragraph.

Meaning of “scheme” and “excluded scheme”

53 (1) For the purposes of this Part “scheme” includes any scheme, arrangements or understanding of any kind whatever, whether or not legally enforceable, involving a single transaction or two or more transactions.

(2) For the purposes of this Part a scheme is “excluded” if it is of a description specified in regulations made by the Commissioners.

(3) Regulations under sub-paragraph (2) may make different provision for different purposes.

Part 7 “Financing expense amount” and “financing income amount”

The financing expense amounts of a company

54 (1) References in this Schedule to a “financing expense amount” of a company for a period of account of the worldwide group are to any amount that meets condition A, B or C.

(2) Condition A is that the amount is a debit that—

(a) would, apart from this Schedule, be brought into account in a relevant accounting period of the company,

(b) would be so brought into account in respect of a loan relationship—

(i) under Part 3 of CTA 2009 by virtue of section 297 of that Act (loan relationships for purposes of trade), or

(ii) under Part 5 of that Act (other loan relationships), and

(c) is not an excluded debit.

(3) A debit is “excluded” if it is in respect of—

(a) an impairment loss,

(b) an exchange loss, or

(c) a related transaction.

(4) Condition B is that the amount is an amount that would, apart from this Schedule, be brought into account for the purposes of corporation tax in a relevant accounting period of the company in respect of the financing cost implicit in payments made under finance leases.

(5) Condition C is that the amount is an amount that would, apart from this Schedule, be brought into account for the purposes of corporation tax in a relevant accounting period of the company in respect of the financing cost payable on debt factoring, or any similar transaction.

(6) In a case where—

(a) a debit or other amount would, apart from this Schedule, be brought into account in an accounting period, and

(b) a proportion of that period does not fall within the period of account of the worldwide group,

the debit or other amount is to be reduced, for the purposes of this paragraph, by the same proportion.

(7) This paragraph is subject to paragraphs 57 to 68.

The financing income amounts of a company

55 (1) References in this Schedule (except in Part 5 and paragraph 52) to a “financing income amount” of a company for a period of account of the worldwide group are to any amount that meets condition A, B or C.

(2) Condition A is that the amount is a credit that—

(a) would, apart from this Schedule, be brought into account in a relevant accounting period of the company,

(b) would be so brought into account in respect of a loan relationship—

(i) under Part 3 of CTA 2009 by virtue of section 297 of that Act (loan relationships for purposes of trade), or

(ii) under Part 5 of that Act (other loan relationships), and

(c) is not an excluded credit.

(3) A credit is “excluded” if it is in respect of—

(a) the reversal of an impairment loss,

(b) an exchange gain, or

(c) a profit from a related transaction.

(4) Condition B is that the amount is an amount that would, apart from this Schedule, be brought into account for the purposes of corporation tax in a relevant accounting period of the company in respect of the financing income implicit in amounts received under finance leases.

(5) Condition C is that the amount is an amount that would, apart from this Schedule, be brought into account for the purposes of corporation tax in a relevant accounting period of the company in respect of the financing income receivable on debt factoring, or any similar transaction.

(6) In a case where—

(a) a credit or other amount would, apart from this Schedule, be brought into account in an accounting period, and

(b) a proportion of that period does not fall within the period of account of the worldwide group,

the credit or other amount is to be reduced, for the purposes of this paragraph, by the same proportion.

(7) This paragraph is subject to paragraphs 57 to 68.

Interpretation of paragraphs 54 and 55

56 In paragraphs 54 and 55 the following expressions have the same meaning as they have in Part 5 of the Corporation Tax Act 2009 (loan relationships)—

• “exchange gain” and “exchange loss”;

• “impairment”;

• “impairment loss”;

• “related transaction”.

Group treasury companies

57 (1) This paragraph applies where, apart from this paragraph, an amount (“the relevant amount”) is—

(a) a financing expense amount of a group treasury company by virtue of meeting condition A, B or C in paragraph 54, or

(b) a financing income amount of a group treasury company by virtue of meeting condition A, B or C in paragraph 55.

(2) The relevant amount, and all other amounts that are relevant amounts in respect of the group treasury company and the relevant period, are treated as not being a financing expense amount or a financing income amount of the group treasury company, but only if that company makes an election for the purposes of this paragraph in respect of the relevant period.

(3) An election under this paragraph must be made within 3 years after the end of the relevant period.

(4) If two or more members of the worldwide group are group treasury companies in the relevant period, an election under this paragraph made by any of them is not valid unless each of them makes such an election in respect of the relevant period before the end of the 3 year period mentioned in sub-paragraph (3).

(5) A company is a group treasury company in the relevant period if the following conditions are met.

(6) The first condition is that the company is a member of the worldwide group.

(7) The second condition is that the company undertakes treasury activities for the worldwide group in the relevant period (whether or not it also undertakes other activities).

(8) The third condition is that—

(a) if the company is the only company to meet the first and second conditions in the relevant period, or the only other companies to meet those conditions are not UK group companies, at least 90% of the relevant income of the company for the relevant period is group treasury revenue, or

(b) if the company and one or more other companies each of which is a UK group company meet the first and second conditions in the relevant period, at least 90% of the aggregate relevant income of those companies for the relevant period is group treasury revenue.

(9) For the purposes of this paragraph a company undertakes treasury activities for the worldwide group in the relevant period if, in that period, it does one or more of the following things in relation to, or on behalf of, the worldwide group or any of its members—

(a) managing surplus deposits of money or overdrafts,

(b) making or receiving deposits of money,

(c) lending money,

(d) subscribing for or holding shares in another company which is a UK group company and a group treasury company,

(e) investing in debt securities, and

(f) hedging assets, liabilities, income or expenses.

(10) For the purposes of this paragraph “group treasury revenue”, in relation to a company, means revenue—

(a) arising from the treasury activities that the company undertakes for the worldwide group, and

(b) accounted for as such under generally accepted accounting practice;

before any deduction (whether for expenses or otherwise).

(11) But revenue consisting of a dividend or other distribution is not group treasury revenue unless it is a dividend or distribution from a company that is, in the relevant period—

(a) a UK group company, and

(b) a group treasury company.

(12) In this paragraph—

• “debt security” has the same meaning as in the FSA Handbook;

• “relevant income”, in relation to a company, means income—

  (a)

  arising from the activities of the company, and

  (b)

  accounted for as such under generally accepted accounting practice,

  before any deduction (whether for expenses or otherwise);

• “relevant period” means the period of account of the worldwide group to which the relevant amount relates.

Real estate investment trusts

58 (1) This paragraph applies where, apart from this paragraph, an amount (“the relevant amount”) is—

(a) a financing expense amount of a company by virtue of meeting condition A in paragraph 54, or

(b) a financing income amount of a company by virtue of meeting condition A in paragraph 55.

(2) The relevant amount is treated as not being a financing expense amount or a financing income amount of the company if the finance arrangement is one to which section 211 of CTA 2009 does not apply by virtue of section 120(3)(a) of FA 2006.

Companies engaged in oil extraction activities

59 (1) This paragraph applies where, apart from this paragraph, an amount (“the relevant amount”) is—

(a) a financing expense amount of a company by virtue of meeting condition A or condition B in paragraph 54, or

(b) a financing income amount of a company by virtue of meeting condition A or condition B in paragraph 55.

(2) The relevant amount is treated as not being a financing expense amount or a financing income amount of the company if the following conditions are met.

(3) The first condition is that the company is treated, in the accounting period in which the amount is brought into account, as carrying on a ring fence trade (see section 502 of ICTA).

(4) The second condition is that the amount falls to be brought into account in calculating the profits of that trade for that accounting period.

Intra-group short-term finance: financing expense

60 (1) This paragraph applies where, apart from this paragraph, an amount (“the relevant amount”) is a financing expense amount of a company (“company A”) by virtue of meeting condition A in paragraph 54.

(2) The relevant amount is treated as not being a financing expense amount of company A, but only if an election is made for this purpose.

(3) Such an election may not be made unless the following conditions are met.

(4) The first condition is that company A and the other party to the loan relationship (“company B”) are both members of the worldwide group.

(5) The second condition is that the finance arrangement is a short-term loan relationship as respects the period of account of the worldwide group.

(6) An election under this paragraph may only be made—

(a) jointly by company A and company B, and

(b) within 36 months of the end of the period of account of the worldwide group to which the relevant amount relates.

(7) An election under this paragraph is irrevocable.

(8) In this paragraph “short-term loan relationship” has the meaning given in paragraph 62.

Intra-group short-term finance: financing income

61 (1) This paragraph applies where—

(a) under paragraph 60, the relevant amount is treated as not being a financing expense amount of company A, and

(b) apart from this paragraph, the relevant amount is a financing income amount of company B by virtue of meeting condition A in paragraph 55.

(2) The relevant amount is treated as not being a financing income amount of company B.

(3) In this paragraph “company A” and “company B” have the same meanings as in paragraph 60.

Short-term loan relationships

62 (1) For the purposes of paragraph 60 the finance arrangement is a short-term loan relationship as respects the period of account of the worldwide group (“the relevant period”) if—

(a) regulations made by the Commissioners provide for it to be so, or

(b) one or other of the following conditions is met.

(2) The first condition is that the finance arrangement does not terminate during the relevant period and—

(a) to the extent that the finance arrangement provides for the creation of money debt, its terms require all money debt created under it to be settled within 12 months of money debt first being created under it, and

(b) to the extent that the finance arrangement is otherwise a loan relationship, its terms provide for it to terminate within 12 months of its coming into force.

(3) The second condition is that the finance arrangement terminates during, or after the end of, the relevant period and—

(a) to the extent that the relationship provided for the creation of money debt, all money debt created under it was settled within 12 months of money debt first being created under it, and

(b) to the extent that the relationship was otherwise a loan relationship, it terminated within 12 months of its coming into force.

(4) The Treasury may by regulations make provision about other circumstances in which the finance arrangement is to be taken not to be a short-term loan relationship as respects—

(a) the relevant period, or

(b) any part or parts of the relevant period.

(5) Regulations under sub-paragraph (4) may include provision for the finance arrangement to be taken never to have been a short-term loan relationship as respects the relevant period or the part or parts of it.

(6) No regulations may be made under sub-paragraph (4) unless a draft of the statutory instrument containing them has been laid before, and approved by a resolution of, the House of Commons.

(7) The Commissioners may by regulations make provision (including provision conferring a discretion on the Commissioners) about circumstances in which regulations under sub-paragraph (4) are not to apply in relation to the finance arrangements.

Stranded deficits in non-trading loan relationships: financing expense

63 (1) This paragraph applies where, apart from this paragraph, an amount (“the relevant amount”) is a financing expense amount of a company (“company A”) by virtue of meeting condition A in paragraph 54.

(2) The relevant amount is to be treated as not being a financing expense amount of company A, but only if an election is made for this purpose.

(3) Such an election may not be made unless the following conditions are met.

(4) The first condition is that company A and the other party to the loan relationship (“company B”) are both members of the worldwide group.

(5) The second condition is that company B—

(a) is resident in the United Kingdom, or

(b) is not resident in the United Kingdom and is carrying on a trade in the United Kingdom through a permanent establishment in the United Kingdom.

(6) The third condition is that, under section 457 of CTA 2009, company B carries forward an amount of non-trading deficit and sets it off against non-trading profits of an accounting period that falls wholly or partly within the period of account of the worldwide group.

(7) The fourth condition is that the amount of non-trading deficit carried forward and set off is equal to, or greater than, the relevant amount.

(8) An election under this paragraph may only be made—

(a) jointly by company A and company B, and

(b) within 36 months of the end of the period of account of the worldwide group to which the relevant amount relates.

Stranded deficits in non-trading loan relationships: financing income

64 (1) This paragraph applies where—

(a) under paragraph 63, the relevant amount is treated is not being a financing expense amount of company A, and

(b) apart from this paragraph, the relevant amount is a financing income amount of company B by virtue of meeting condition A in paragraph 55.

(2) The relevant amount is treated as not being a financing income amount of company B.

(3) In this paragraph “company A” and “company B” have the same meanings as in paragraph 63.

Stranded management expenses in non-trading loan relationships: financing expense

65 (1) This paragraph applies where, apart from this paragraph, an amount (“the relevant amount”) is a financing expense amount of a company (“company A”) by virtue of meeting condition A in paragraph 54.

(2) The relevant amount is treated as not being a financing expense amount of company A, but only if an election is made for this purpose.

(3) Such an election may not be made unless the following conditions are met.

(4) The first condition is that company A and the other party to the finance arrangement (“company B”) are both members of the worldwide group.

(5) The second condition is that company B is a company with investment business (within the meaning of Part 16 of CTA 2009) and—

(a) is resident in the United Kingdom, or

(b) is not resident in the United Kingdom and is carrying on a trade in the United Kingdom through a permanent establishment in the United Kingdom.

(6) The third condition is that company B is allowed a deduction under section 1219 of CTA 2009 (expenses of management of a company’s investment business) in respect of an accounting period that falls wholly or partly within the period of account of the worldwide group (“the relevant period”).

(7) The fourth condition is that the amount of the deduction allowed is equal to, or greater than, the relevant amount.

(8) The fifth condition is that the calculation of company B’s total profits for the relevant period for the purposes of corporation tax results in a loss if company B’s credit is not included in that calculation.

(9) An election under this paragraph may only be made—

(a) jointly by company A and company B, and

(b) within 36 months of the end of the period of account of the worldwide group to which the relevant amount relates.

(10) In this paragraph “company B’s credit” means the credit to company B that arises from the debit to company A by virtue of which condition A in paragraph 54 is met.

Stranded management expenses in non-trading loan relationships: financing income

66 (1) This paragraph applies where—

(a) under paragraph 65, the relevant amount is treated is not being a financing expense amount of company A, and

(b) apart from this paragraph, the relevant amount is a financing income amount of company B by virtue of meeting condition A in paragraph 55.

(2) The relevant amount is treated as not being a financing income amount of company B.

(3) In this paragraph “company A” and “company B” have the same meanings as in paragraph 65.

Charities

67 (1) This paragraph applies where, apart from this paragraph, an amount (“the relevant amount”) is a financing expense amount of a company by virtue of meeting condition A, B or C in paragraph 54.

(2) The relevant amount is treated as not being a financing expense amount of the company if the creditor is a charity.

(3) In this paragraph—

• “charity” means any body of persons or trust established for charitable purposes only;

• “creditor” means—

  (a)

  in a case where the relevant amount is a debit that meets condition A in paragraph 54, the loan creditor who receives the payment in relation to which the relevant amount arises;

  (b)

  in a case where the relevant amount meets condition B or C in paragraph 54, the recipient of the payment in relation to which the relevant amount arises.

Educational and public bodies

68 (1) This paragraph applies where, apart from this paragraph, an amount (“the relevant amount”) is a financing expense amount of a company by virtue of meeting condition A, B or C in paragraph 54.

(2) The relevant amount is treated as not being a financing expense amount of the company if the creditor is—

(a) a designated educational establishment,

(b) a health service body,

(c) a local authority, or

(d) a person that is prescribed, or is of a description of persons prescribed, in an order made by the Commissioners for the purposes of this paragraph.

(3) The Commissioners may not prescribe a person, or a description of persons, for the purposes of this paragraph unless they are satisfied that the person, or each of the persons within the description, has functions some or all of which are of a public nature.

(4) In this paragraph—

• “creditor” means—

  (a)

  in a case where the relevant amount is a debit that meets condition A in paragraph 54, the loan creditor who receives the payment in relation to which the relevant amount arises;

  (b)

  in a case where the relevant amount meets condition B or C in paragraph 54, the recipient of the payment in relation to which the relevant amount arises;

• “designated educational establishment” has the same meaning as in section 105 of CTA 2009;

• “health service body” has the same meaning as in section 519A of ICTA.

Interpretation of paragraphs 57 to 68

69 In paragraphs 57 to 68 “finance arrangement” means—

(a) in the case of an amount that is a debit or credit that meets the condition in paragraph 54(2) or 55(2), the loan relationship to which the debit or credit relates;

(b) in the case of an amount that meets the condition in paragraph 54(4) or 55(4), the finance lease to which the amount relates;

(c) in the case of an amount that meets the condition in paragraph 54(5) or 55(5), the debt factoring or similar transaction to which the amount relates.

Part 8 The “tested expense amount” and “tested income amount”

The tested expense amount

70 (1) References in this Schedule to the “tested expense amount” for a period of account of the worldwide group are to the sum of the net financing deductions of each relevant group company.

(2) References in this Schedule to the “net financing deduction” of a company for a period of account of the worldwide group are to—

(a) the sum of the company’s financing expense amounts for the period (see paragraph 54), less

(b) the sum of the company’s financing income amounts for the period (see paragraph 55).

(3) References in sub-paragraph (2) to a company’s financing expense amounts or financing income amounts for a period of account of the worldwide group do not include any amount that arises as a result of a transaction that takes place at a time at which the company is not a relevant group company.

(4) Where the amount determined in accordance with sub-paragraph (2) is negative, the net financing deduction of the company for the period is nil.

(5) Where the amount determined in accordance with sub-paragraph (2) is small (see paragraph 72), the net financing deduction of the company for the period is nil.

The tested income amount

71 (1) References in this Schedule to the “tested income amount” for the period of account of the worldwide group are to the sum of the net financing incomes of each UK group company.

(2) The reference in sub-paragraph (1) to the “net financing income” of a company for a period of account of the worldwide group is to—

(a) the sum of the company’s financing income amounts for the period (see paragraph 55), less

(b) the sum of the company’s financing expense amounts for the period (see paragraph 54).

(3) References in sub-paragraph (2) to a company’s financing expense amounts or financing income amounts for a period of account of the worldwide group do not include any amount that arises as a result of a transaction that takes place at a time at which the company is not a UK group company.

(4) Where the amount determined in accordance with sub-paragraph (2) is negative, the net financing income of the company for the period is nil.

(5) Where the amount determined in accordance with sub-paragraph (2) is small (see paragraph 72), the net financing income of the company for the period is nil.

Companies with net financing deduction or net financing income that is small

72 (1) An amount determined in accordance with paragraph 70(2) or 71(2) is “small” if it is less than £500,000.

(2) The Treasury may by order amend sub-paragraph (1) by substituting a higher or lower amount for the amount for the time being specified there.

(3) No order may be made under sub-paragraph (2) unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, the House of Commons.

(4) An order under sub-paragraph (2) may only have effect in relation to periods of account of the worldwide group beginning after the date on which the order is made.

Part 9 The “available amount”

The available amount

73 (1) References in this Schedule to the “available amount” for a period of account of the worldwide group are to the sum of the amounts disclosed in the financial statements of the group for that period in respect of—

(a) interest payable on amounts borrowed,

(b) amortisation of discounts relating to amounts borrowed,

(c) amortisation of premiums relating to amounts borrowed,

(d) amortisation of ancillary costs relating to amounts borrowed,

(e) the financing cost implicit in payments made under finance leases,

(f) the financing cost relating to debt factoring, or

(g) amounts of such other description as may be specified in regulations made by the Commissioners.

(2) An amount that falls within any of paragraphs (a) to (g) of sub-paragraph (1) is to be disregarded for the purposes of that sub-paragraph to the extent that—

(a) the amount represents a dividend payable in respect of preference shares, and

(b) those shares are recognised as a liability in the financial statements of the group for the period.

Group members with income from oil extraction subject to particular tax treatment in UK

74 (1) In calculating the available amount, an amount disclosed in the financial statements of the worldwide group (“the external finance amount”) must be disregarded if the following conditions are met.

(2) Condition A is that a member of the worldwide group is treated in a relevant accounting period as carrying on a ring fence trade (see section 502 of ICTA).

(3) Condition B is that the external finance amount falls to be brought into account for the purposes of corporation tax in calculating the profits of that trade for that accounting period.

(4) In this paragraph “relevant accounting period”, in relation to a member of the worldwide group, means an accounting period of the member that falls wholly or partly within the period of account.

Group members with income from shipping subject to particular tax treatment in UK

75 (1) In calculating the available amount, an amount disclosed in the financial statements of the worldwide group (“the external finance amount”) must be disregarded if the following conditions are met.

(2) Condition A is that a member of the worldwide group is, for a relevant accounting period, a tonnage tax company for the purposes of Schedule 22 to FA 2000.

(3) Condition B is that the external finance amount—

(a) is taken into account in computing relevant shipping profits of that company for that accounting period, or

(b) comprises deductible finance costs outside the ring fence, to the extent that they are adjusted under paragraph 61 or 62 of Schedule 22 to FA 2000.

(4) In this paragraph—

• “relevant accounting period”, in relation to a member of the worldwide group, means an accounting period of the member that falls wholly or partly within the period of account;

• “relevant shipping profits” has the same meaning as in Schedule 22 to FA 2000 (see Part 6 of that Schedule).

Group members with income from property rental subject to particular tax treatment in UK

76 (1) In calculating the available amount, an amount disclosed in the financial statements of the worldwide group (“the external finance amount”) must be disregarded if the following conditions are met.

(2) Condition A is that a member of the worldwide group is treated in a relevant accounting period as carrying on a separate business under section 113 of FA 2006 (ring-fencing of tax exempt business).

(3) Condition B is that the external finance amount falls to be brought into account in calculating the profits arising from that business in that accounting period.

(4) In this paragraph “relevant accounting period”, in relation to a member of the worldwide group, means an accounting period of the member that falls wholly or partly within the period of account.

Meaning of accounting expressions used in this Part

77 Subject to any provision to the contrary, expressions used in this Part have the meaning for the time being given by international accounting standards.

Part 10 Other interpretative provisions

The worldwide group

78 In this Schedule “the worldwide group” means any group of entities that—

(a) is large, and

(b) contains one or more relevant group companies.

Meaning of “group”

79 (1) Subject to sub-paragraphs (2) and (3), in this Schedule “group” has the meaning for the time being given by international accounting standards.

(2) Where a group would (apart from this sub-paragraph) contain more than one ultimate parent, each of those ultimate parents, together with its subsidiaries, is to be treated as a separate group.

(3) An entity that is a parent of the ultimate parent of a group is to be treated as not being a member of the group.

(4) Sub-paragraphs (2) and (3) do not apply for the purposes of paragraph 80.

Meaning of “ultimate parent”

80 (1) For the purposes of this Schedule “ultimate parent”, in relation to a group, means an entity that—

(a) is a member of the group,

(b) is a corporate entity or a relevant non-corporate entity,

(c) is not a subsidiary (whether direct or indirect) of a corporate entity or a relevant non-corporate entity, and

(d) is not a collective investment scheme.

(2) In this paragraph “collective investment scheme” has the meaning given by section 235 of FISMA 2000.

Meaning of “corporate entity”

81 (1) In this Schedule “corporate entity” means (subject to sub-paragraph (4))—

(a) a body corporate incorporated under the laws of any part of the United Kingdom or any other country or territory, or

(b) any other entity that meets conditions A and B.

(2) Condition A is that the person or persons who have an interest in the entity hold shares in the entity, or interests corresponding to shares.

(3) Condition B is that the amount of profits to which each person who has an interest in the entity is entitled depends upon a decision that—

(a) is taken by the entity or members of the entity, and

(b) is taken after the period in which the profits arise.

(4) The following are not corporate entities for the purposes of this Schedule—

(a) the Crown,

(b) a Minister of the Crown,

(c) a government department,

(d) a Northern Ireland department, or

(e) a foreign sovereign power.

Meaning of “relevant non-corporate entity”

82 (1) In this Schedule “relevant non-corporate entity” means an entity—

(a) that is not a corporate entity, and

(b) in relation to which conditions A and B are met.

(2) Condition A is that shares or other interests in the entity are listed on a recognised stock exchange.

(3) Condition B is that the shares or other interests in the entity are sufficiently widely held.

(4) For this purpose shares or other interests in an entity are “sufficiently widely held” if no participator in the entity holds more than 10% by value of all the shares or other interests in the entity.

(5) Section 417(1) of ICTA (meaning of participator) applies for the purposes of this paragraph.

(6) In the application of that provision for those purposes, references to a company are to be treated as references to an entity.

Treatment of entities stapled to corporate entities or relevant non-corporate entities

83 (1) Where a corporate entity is stapled to another entity, the two entities are treated for the purposes of this Schedule as if—

(a) they were one entity, and

(b) that one entity were a corporate entity.

(2) Where a relevant non-corporate entity is stapled to another entity, the two entities are treated as if—

(a) they were one entity, and

(b) that one entity were a relevant non-corporate entity.

(3) For the purposes of this paragraph an entity (“entity A”) is “stapled” to another (“entity B”) if, in consequence of the nature of the rights attaching to the shares or other interests in entity A (including any terms or conditions attaching to the right to transfer the interests), it is necessary or advantageous for a person who has, disposes of or acquires shares or other interests in entity A also to have, to dispose of or to acquire shares or other interests in entity B.

Treatment of business combinations

84 (1) This paragraph applies where two corporate entities are—

(a) not subsidiaries of the same entity, but

(b) are treated under international accounting standards as a single economic entity by reason of being a business combination achieved by contract.

(2) The two entities are treated for the purposes of this Schedule as if—

(a) they were one entity, and

(b) that one entity were a corporate entity.

Meaning of “large” in relation to a group

85 (1) For the purposes of this Schedule a group is “large” at any time if (and only if) any member of the group is not at that time within the category of micro, small and medium-sized enterprises as defined in the Annex to Commission Recommendation 2003/361/EC of 6 May 2003 (“the Annex”).

(2) In its application by virtue of sub-paragraph (1), the Annex has effect subject to the following qualifications.

(3) Where a member of the group is in liquidation or administration, the rights of the liquidator or administrator (in that capacity) are to be left out of account when applying Article 3(3)(b).

(4) Article 3 has effect with the omission of paragraph (5) (declaration in good faith where control cannot be determined etc).

(5) The first sentence of Article 4(1) has effect as if the reference to the latest approved accounting period of a member of the group were to the current accounting period of that member.

(6) Article 4 has effect with the omission of—

(a) the second sentence of paragraph (1) (data to be taken into account from date of closure of accounts),

(b) paragraph (2) (no change of status unless ceilings exceeded for two consecutive periods), and

(c) paragraph (3) (estimate in case of newly established enterprise).

Meaning of “UK group company” and “relevant group company”

86 (1) This paragraph applies for the purposes of this Schedule.

(2) A company is a “UK group company” if—

(a) it meets condition A, and

(b) it is a member of the worldwide group.

(3) A company is a “relevant group company” if—

(a) it meets condition A, and

(b) it meets condition B.

(4) Condition A is that the company—

(a) is resident in the United Kingdom, or

(b) is not resident in the United Kingdom and is carrying on a trade in the United Kingdom through a permanent establishment in the United Kingdom.

(5) Condition B is that the company is either—

(a) the ultimate parent of the worldwide group, or

(b) a relevant subsidiary of the ultimate parent of the worldwide group.

(6) A company is a “relevant subsidiary” of the ultimate parent of the worldwide group if the company is a member of the worldwide group and—

(a) the company is a 75% subsidiary of the ultimate parent,

(b) the ultimate parent is beneficially entitled to at least 75% of any profits available for distribution to equity holders of the company, or

(c) the ultimate parent would be beneficially entitled to at least 75% of any assets of the company available for distribution to its equity holders on a winding-up.

(7) Schedule 18 to ICTA (equity holders and profits or assets available for distribution) applies in relation to sub-paragraph (6)(b) and (c) as it applies in relation to section 413(7) of that Act.

Financial statements of the worldwide group

87 (1) This paragraph applies for the purposes of this Schedule.

(2) References to financial statements of the worldwide group are to consolidated financial statements of the ultimate parent and its subsidiaries; and references to a balance sheet of the worldwide group are to be read accordingly.

(3) References to a period of account of the worldwide group are to a period in respect of which financial statements of the worldwide group are drawn up.

Non-compliant financial statements of worldwide group

88 (1) This paragraph applies where—

(a) financial statements of the worldwide group are drawn up in respect of a period,

(b) those financial statements are not acceptable, and

(c) the amounts disclosed in those financial statements are materially different from those that would be disclosed in IAS financial statements for the period.

(2) This Schedule (apart from this paragraph) applies as if IAS financial statements had been drawn up in respect of the period.

(3) For the purposes of this paragraph financial statements are “acceptable” if—

(a) they are drawn up in accordance with international accounting standards,

(b) they meet such conditions relating to accounting standards, or accounting principles or practice, as may be specified in regulations made by the Commissioners, or

(c) conditions A to C are met.

(4) Condition A is that—

(a) the companies whose results are included in the financial statements, and

(b) the companies whose results would be included in IAS financial statements of the worldwide group for the same period, were such statements drawn up,

are the same.

(5) Condition B is that—

(a) the transactions whose results are reflected in the amounts mentioned in paragraph 73(1)(a) to (g) in the financial statements, and

(b) the transactions whose results would be reflected in those amounts in IAS financial statements of the worldwide group for the same period, were such statements drawn up,

are the same.

(6) Condition C is that the amounts mentioned in paragraph 73(1)(a) to (d) in the financial statements are calculated using the effective interest method.

(7) In this paragraph references to IAS financial statements of the worldwide group for a period are to financial statements of the group for the period drawn up in accordance with international accounting standards.

Non-existent financial statements of worldwide group

89 (1) This paragraph applies where financial statements of the worldwide group are not drawn up in respect of a period (“the relevant period”).

(2) If the relevant period is 12 months or less, this Schedule (apart from this paragraph) applies as if IAS financial statements had been drawn up in respect of the relevant period.

(3) If the relevant period is more than 12 months, this Schedule (apart from this paragraph) applies as if IAS financial statements had been drawn up in respect of each period to which sub-paragraph (4) applies.

(4) This sub-paragraph applies to a period if—

(a) it is the first period of 12 months falling within the relevant period,

(b) it is a period of 12 months falling within the relevant period that begins immediately after the end of the period mentioned in paragraph (a), or immediately after the end of a period determined under this paragraph, or

(c) it is a period of less than 12 months that—

(i) begins immediately after the end of the period mentioned in paragraph (a) or after the end of a period determined under paragraph (b), and

(ii) ends at the end of the relevant period.

(5) In this paragraph references to IAS financial statements of the worldwide group for a period are to financial statements of the group for the period drawn up in accordance with international accounting standards.

References to amounts disclosed in financial statements

90 (1) References in this Schedule to amounts disclosed in financial statements include an amount comprised in an amount so disclosed.

(2) References in this Schedule to amounts disclosed in financial statements do not include, in the case of an amount that—

(a) is an amount mentioned in paragraph 73(1)(a) to (g), and

(b) has been capitalised and is accordingly included in the balance sheet comprised in the financial statements,

any part of that amount that was included in a balance sheet comprised in financial statements for an earlier period.

(3) References in this Schedule to amounts disclosed in financial statements do not include—

(a) any amount disclosed in respect of a group pension scheme, or

(b) any amount disclosed in respect of any entity that is not a member of the group.

Translation of amounts disclosed in financial statements into sterling

91 (1) References in this Schedule (except in Part 2) to an amount disclosed in financial statements for a period are, where the amount is expressed in a currency other than sterling, to that amount translated into its sterling equivalent.

(2) The exchange rate by reference to which the amount is to be translated is the average rate of exchange for the period calculated from daily spot rates.

Expressions taking their meaning from international accounting standards

92 (1) For the purposes of this Schedule the following expressions have the meaning for the time being given by international accounting standards—

• “effective interest method”;

• “entity”;

• “parent”;

• “subsidiary”.

(2) The Commissioners may by order amend this paragraph.

Meaning of “relevant accounting period”

93 For the purposes of this Schedule a “relevant accounting period” of a company, in relation to a period of account of the worldwide group, means any accounting period that falls wholly or partly within the period of account of the worldwide group.

Meaning of “the Commissioners” and “HMRC”

94 In this Schedule—

• “the Commissioners” means the Commissioners for Her Majesty’s Revenue and Customs;

• “FSA Handbook” means the Handbook made by the Financial Services Authority under FISMA 2000;

• “HMRC” means Her Majesty’s Revenue and Customs.

Part 11 Consequential amendments and commencement

Consequential amendments

95 In section 98 of TMA 1970 (special returns etc), in the first column of the Table, insert at the end—

“regulations under paragraph 24, 25, 26, 36 or 38 of Schedule 15 to FA 2009.”

96 In paragraph 5 of Schedule 28AA to ICTA (provision not at arm’s length), after sub-paragraph (8) (as inserted by paragraph 14 of Schedule 14 to this Act) insert—

“(9) For the purposes of sub-paragraph (1), Schedule 15 to FA 2009 (tax treatment of financing costs and income) is to be disregarded.”

Commencement

97 This Schedule has effect in relation to periods of account of the worldwide group—

(a) that begin on or after 1 January 2010, or

(b) to which paragraph 98 applies.

Anti-avoidance: change of period of account of worldwide group

98 This paragraph applies to a period of account of the worldwide group (“the relevant period of account”) if—

(a) the ultimate parent of the group changes the date to which financial statements of the group are drawn up,

(b) as a result of the change, the relevant period of account—

(i) begins before 1 January 2010, and

(ii) includes a period that would, if the change had not been made, have fallen within a period of account beginning on or after that date, and

(c) the main purpose, or one of the main purposes, of the ultimate parent of the group in making the change is to secure that the first period of account in relation to which this Schedule has effect does not include any period falling within the relevant period of account.

Transitional provision

99 (1) An amount that would, apart from this paragraph, meet condition A, B or C in paragraph 54 (definition of “financing expense amount”) does not meet that condition if it is a debit that, but for a relevant enactment, would be brought into account for the purposes of corporation tax in an accounting period beginning before 1 January 2010.

(2) For this purpose the following are “relevant enactments”—

(a) section 373 of CTA 2009 (late interest treated as not accruing until paid in some cases),

(b) section 407 of that Act (postponement until redemption of debits for connected companies' deeply discounted securities),

(c) section 409 of that Act (postponement until redemption of debits for close companies' deeply discounted securities), and

(d) regulation 3A of the Loan Relationships and Derivative Contracts (Change of Accounting Practice) Regulations 2004 (S.I. 2004/3271) (prescribed debits and credits brought into account over prescribed period).

(3) An amount that would, apart from this paragraph, meet condition A, B or C in paragraph 55 (definition of “financing income amount”) does not meet that condition if it is a credit that, but for the regulation mentioned in sub-paragraph (2)(d) of this paragraph, would be brought into account for the purposes of corporation tax in an accounting period beginning before 1 January 2010.