The next article in our series looks at some issues linked to the CIR group.
This is the eighth of our series of articles looking at some of the detail of the new corporate interest restriction (CIR) rules, which have been removed from Finance Bill 2017 following the announcement of the general election. Based upon the HMRC messaging that “There has been no policy change and the Government has announced it will legislate for the provisions at the earliest opportunity in the next Parliament” we would recommend that groups assume that the rules will apply from 1 April 2017 until an announcement is made by Ministers. The CIR rules operate by reference to the ‘worldwide group’, and last week we looked at how to identify this group. This week, we take a look at other matters linked to the role of the group in the CIR calculations.
Determining the period of account
The CIR disallowance of interest-like expenses is tested by reference to the group’s period of account. Where an ultimate parent of a CIR group draws up consolidated financial statements for the worldwide group, in most cases, the period of account to be used will be the period covered by such accounts, unless they are drawn up for a period exceeding 18 months or are drawn up more than 30 months after the start of the period.
Where the ultimate parent does not draw up consolidated financial statements for the worldwide group (or draws up statements that do not meet the above requirements), a default period of account is prescribed by the legislation, but the ultimate parent may be able to elect for a different period of account to be used.
Determining what financial statements to use
Where the CIR rules use amounts determined at the group level, the basic rule is to extract these from the consolidated financial statements of the ultimate parent. This is subject to the following.
Changes in group arrangements
The composition of the worldwide group can change over time as companies both join and leave the group. The rules contain provision for this and determine the identity of the worldwide group by reference to the ultimate parent. This means that where the composition of the group changes, the identity of the group will be preserved as long as the ultimate parent remains the same. To provide some examples of how the rules operate:
This is the eighth in our series of articles on the detail of the new corporate interest restriction regime.
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