Finance Bill (HC Bill 102)

Step 4

Add together the amounts found under Step 3.

402 30Effect of group ratio (blended) election on group ratio debt cap

(1) Where a group ratio (blended) election (see paragraph 14 of Schedule
7A) has effect in relation to a period of account of a worldwide group
(“the relevant period of account”), this Chapter applies subject to this
section.

(2) 35In section 400 (the debt cap), subsection (2)(a) is treated as if—

(a) it did not refer to the qualifying net group-interest expense of
the group for the period, and

(b) instead it referred to the blended net group-interest expense
of the group for the period, as determined in accordance with
40this section.

(3) The blended net group-interest expense of the group for the relevant
period of account is determined by taking the following steps—

Step 1

For each investor in the group whose applicable percentage for the
45purposes of section 401 is the percentage mentioned in subsection
(4)(a) of that section, multiply the adjusted net group-interest

expense of the group for the period by the investor’s share in the
group.

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Step 2

For each investor in the group whose applicable percentage for the
purposes of section 401 is the percentage mentioned in subsection
(4)(b) of that section, multiply the qualifying net group-interest
5expense of the group for the period by the investor’s share in the
group.

Step 3

For each investor in the group whose applicable percentage for the
purposes of section 401 is the percentage mentioned in subsection
10(4)(c) of that section, find the applicable net group-interest expense
of the investor’s worldwide group for the period (see subsections (4)
to (8) of this section).

Step 4

Add together the amounts found under Steps 1, 2 and 3.

(4) 15For the purposes of this section, the “applicable net group-interest
expense” of the investor’s worldwide group for a period of account
is so much of the qualifying net group-interest expense of the
investor’s worldwide group for the period as relates to loans to, or
other financial arrangements with, members of the investor’s
20worldwide group that are used to fund (directly or indirectly) loans
to, or other financial arrangements with, members of the worldwide
group mentioned in subsection (1).

(5) Subsection (6) applies where periods of account of the investor’s
worldwide group (“the investor’s periods of account”) are
25comprised in or overlap with (but are not coterminous with) the
relevant period of account.

(6) The applicable net group-interest expense of the investor’s
worldwide group for the relevant period of account is the aggregate
of so much of the applicable net group-interest expense of the
30investor’s worldwide group for each of the investor’s periods of
account as is referable, on a just and reasonable basis, to the relevant
period of account.

(7) Subsection (8) applies where—

(a) a loan is made to, or another financial arrangement is entered
35into with, a member of the investor’s worldwide group, and

(b) the loan or other financial arrangement is—

(i) in part used to fund (directly or indirectly) loans to, or
other financial arrangements with, members of the
worldwide group mentioned in subsection (1), and

(ii) 40in part used for other purposes.

(8) In determining the applicable net group-interest expense of the
investor’s worldwide group for any period, the amount of the
qualifying net group-interest expense of the investor’s worldwide
group for the period that is brought into account, in respect of the
45loan or other financial arrangement mentioned in subsection (7)(a),
is confined to such amount as is referable, on a just and reasonable
basis, to the use mentioned in subsection (7)(b)(i).

(9) In this section—

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  • “financial arrangements” does not include the holding of
    shares;

  • “the investor’s worldwide group” has the same meaning as in
    section 401.

403 5Calculations under sections 401 and 402: investor worldwide groups

(1) This section applies—

(a) in determining, under section 401, the group ratio percentage
of the investor’s worldwide group for a period of account;

(b) in determining, under section 402, the qualifying net group-
10interest expense of the investor’s worldwide group for a
period of account.

(2) Where the group ratio (blended) election specifies that a particular
election under Schedule 7A (“the investor’s election”) is to be treated
as having effect, or as not having effect, in relation to periods of
15account of the investor’s worldwide group, the investor’s election is
to be so treated in determining the amounts mentioned in subsection
(1).

(3) Where the group ratio (blended) election does not specify that a
particular election under Schedule 7A (“the investor’s election”) is to
20be treated as having effect, or as not having effect, in relation to
periods of account of the investor’s worldwide group, the investor’s
election is to be treated as having effect in determining the amounts
mentioned in subsection (1) only if it was in fact made in relation to
the period of account in question by a reporting company of the
25investor’s worldwide group.

(4) In this section “the investor’s worldwide group” has the same
meaning as in section 401.

404 Meaning of “investor”, “related party investor” and investor’s “share”

(1) An entity is an “investor” in a worldwide group if it has an interest
30in the ultimate parent of the group that entitles it to a proportion of
the profits or losses of the group.

(2) An investor in a worldwide group is a “related party investor” of the
group in relation to a period of account of the group if, throughout
the period, it is a related party of the ultimate parent of the group.

(3) 35The “share” of an investor in a worldwide group, in relation to a
period of account of the group, is the proportion (expressed as a
percentage) of the profits or losses of the group that arise in the
period to which the investor is entitled by virtue of the investor’s
interest in the group’s ultimate parent.

(4) 40This section has effect for the purposes of this Part.

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CHAPTER 6 Tax-EBITDA
405 The aggregate tax-EBITDA of a worldwide group

For the purposes of this Part “the aggregate tax-EBITDA” of a
5worldwide group for a period of account of the group is—

(a) the total of the tax-EBITDAs for the period of each company
that was a member of the group at any time during the
period, or

(b) where the amount specified in paragraph (a) is negative, nil.

406 10The tax-EBITDA of a company

(1) For the purposes of this Part the “tax-EBITDA” of a company for a
period of account of the worldwide group is—

(a) where the company has only one relevant accounting period,
the company’s adjusted corporation tax earnings for that
15accounting period;

(b) where the company has more than one relevant accounting
period, the total of the company’s adjusted corporation tax
earnings for each of those accounting periods.

(2) The company’s “adjusted corporation tax earnings” for an
20accounting period is the total (which may be negative) of the
amounts that meet condition A or B.

(3) Condition A is that the amount—

(a) is brought into account by the company in determining its
taxable total profits of the period (within the meaning given
25by section 4(2) of CTA 2010), and

(b) is not an excluded amount for the purposes of this condition
(see section 407).

(4) Condition B is that the amount—

(a) is not brought into account as mentioned in subsection (3)(a),
30but would have been so brought into account if the company
had made profits, or more profits, of any description in the
period, and

(b) is not an excluded amount for the purposes of this condition
(see section 407).

(5) 35Subsection (7) applies if an amount—

(a) is brought into account as mentioned in subsection (3)(a), or

(b) is not brought into account as mentioned in subsection (4)(a),

in an accounting period which contains one or more disregarded
periods.

(6) 40A “disregarded period” is any period falling within the accounting
period—

(a) which does not fall within the period of account of the
worldwide group, or

(b) throughout which the company is not a member of the group.