Finance Bill (HC Bill 102)

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(a) the financial statements mentioned in subsection (1) are to be
ignored, and

(b) consolidated financial statements of the ultimate parent and
its IAS subsidiaries are treated as having been drawn up in
5respect of the period.

(4) The financial statements treated by subsection (3)(b) as drawn up are
treated as drawn up in accordance with the same accounting
principles and practice as the financial statements mentioned in
subsection (1).

(5) 10In this section a reference to financial statements consolidating the
results of an entity is to consolidating its results with those of the
ultimate parent as the results of a single economic entity.

483 Actual financial statements covering more than one worldwide group

(1) This section applies where—

(a) 15consolidated financial statements of an entity and its
subsidiaries are drawn up by or on behalf of the entity in
respect of a period (“the actual period of account”), and

(b) the entity was the ultimate parent of a worldwide group for
a part (but not all) of that period.

(2) 20For the purposes of this Part (apart from this section)—

(a) the financial statements mentioned in subsection (1)(a) are to
be ignored, and

(b) consolidated financial statements of the entity and its IAS
subsidiaries are treated as having been drawn up in respect
25of the part of the actual period of account mentioned in
subsection (1)(b).

(3) The financial statements treated by subsection (2)(b) as drawn up are
treated as drawn up—

(a) where the financial statements mentioned in subsection (1)(a)
30are drawn up on acceptable principles, in accordance with
the same accounting principles and practice as those financial
statements;

(b) otherwise, in accordance with international accounting
standards.

(4) 35In this section “IAS subsidiary” has the same meaning as in section
482.

484 No actual financial statements: ultimate parent draws up financial
statements

(1) Subsection (2) applies where—

(a) 40financial statements of the ultimate parent of a worldwide
group are drawn up by or on behalf of the ultimate parent in
respect of a period (“the relevant period”),

(b) consolidated financial statements of the ultimate parent and
its subsidiaries are not drawn up by or on behalf of the
45ultimate parent in respect of the relevant period or any part
of it, and

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(c) the group was, at any time during the relevant period, a
multi-company worldwide group.

(2) For the purposes of this Part (apart from this section) IAS financial
statements of the worldwide group are treated as drawn up in
5respect of the relevant period.

(3) The ultimate parent may elect that subsection (2) is not to apply in
relation to financial statements of the ultimate parent.

(4) An election under subsection (3)

(a) has effect in relation to financial statements in respect of
10periods ending on or after such date as is specified in the
election, and

(b) is irrevocable.

(5) The date specified in the election may not be before the day on which
the election is made.

485 15No actual financial statements: other cases

(1) In this section “accounts-free period” means (subject to subsection
(2)) any period—

(a) which begins on or after 1 April 2017,

(b) throughout which a worldwide group exists, and

(c) 20in respect of no part of which are financial statements of the
group—

(i) drawn up by or on behalf of the ultimate parent, or

(ii) treated as drawn up for the purposes of this section
(whether under section 481, 482, 483 or 484 or any
25other enactment).

(2) A period is not an “accounts-free period” if it forms part of an
accounts-free period.

(3) If an accounts-free period in relation to a worldwide group is 12
months or less, IAS financial statements of the worldwide group are
30treated for the purposes of this Part (apart from this section) as
having been drawn up for the accounts-free period.

(4) If an accounts-free period in relation to a worldwide group is more
than 12 months, IAS financial statements of the worldwide group are
treated for the purposes of this Part (apart from this section) as
35having been drawn up for each of the following periods—

(a) the first period of 12 months falling within the accounts-free
period;

(b) any subsequent period of 12 months falling within the
accounts-free period;

(c) 40any period of less than 12 months which—

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

(ii) ends at the end of the accounts-free period.

486 Election altering period of account deemed under section 485

(1) 45This section applies where, disregarding this section, IAS financial
statements of a worldwide group would be treated under section

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485(4)(a) or (b) as drawn up for a period (“the default period of
account”) during an accounts-free period.

(2) The ultimate parent of the group may make an election under this
section in relation to the default period of account.

(3) 5Where an election under this section is made, section 485 has effect
as if subsection (4)(a) or (b) of that section—

(a) did not treat IAS financial statements of the group as having
been drawn up for the default period of account;

(b) instead, treated IAS financial statements of the group as
10having been drawn up for the period—

(i) beginning with the day on which the default period of
account begins (“the start day”), and

(ii) ending with such day after the start day as is specified
in the election (“the end day”).

(4) 15The end day must—

(a) fall within the accounts-free period, and

(b) not be later than the final day of the period of 18 months
beginning with the start day.

(5) An election under this section—

(a) 20must be made before the end day, and

(b) is irrevocable.

(6) The fact that the ultimate parent of a worldwide group makes an
election under this section in relation to a default period of account
(“the earlier elected period”) does not prevent it from making an
25election in relation to a later default period of account (“the later
elected period”).

(7) But where it does so, the end day in relation to the later elected
period must be 3 years or more after the end day in relation to the
earlier elected period.

(8) 30Where this section modifies section 485(4)(a) or (b) so that it treats
IAS financial statements of the group as having been drawn up for
the period mentioned in subsection (3)(b) of this section (“the elected
period”), section 485(4)(b) and (c) apply in relation to any part of the
accounts-free period following the end of the elected period.

(9) 35In this section “accounts-free period” has the same meaning as in
section 485.

487 Actual financial statements ignored if for too long a period or too late

Financial statements drawn up by or on behalf of any entity are to be
ignored for the purposes of this Part (apart from this section) if—

(a) 40the period in respect of which they are drawn up is more than
18 months, or

(b) they are drawn up after the end of the period of 30 months
beginning with the beginning of the period in respect of
which they are drawn up.

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488 Meaning of “IAS financial statements”

(1) References in this Part to “IAS financial statements” of a worldwide
group for a period are (subject to subsection (2)) to consolidated
financial statements of the worldwide group’s ultimate parent and
5its subsidiaries, drawn up in respect of the period in accordance with
international accounting standards.

(2) If the worldwide group is at all times during the period a single-
company worldwide group, the references are instead to financial
statements of the ultimate parent, drawn up in respect of the period
10in accordance with international accounting standards.

489 References to amounts recognised in financial statements

(1) References in this Part to an amount “recognised” in financial
statements—

(a) include an amount comprised in an amount so recognised;

(b) 15are, 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 an amount is to be
translated under subsection (1)(b) is the average rate of exchange for
the period of account, calculated from daily spot rates.

(3) 20References in this Part to an amount recognised in financial
statements “for a period” as an item of profit or loss include
references to an amount that—

(a) was previously recognised as an item of other comprehensive
income, and

(b) 25is transferred to become an item of profit or loss in
determining the profit or loss for the period.

Other definitions
490 Meaning of “relevant accounting period”

For the purposes of this Part a “relevant accounting period” of a
30company, in relation to a period of account of a worldwide group,
means any accounting period that falls wholly or partly within the
period of account of the worldwide group.

491 Meaning of “relevant public body”

(1) In this Part “relevant public body” means—

(a) 35the Crown,

(b) a Minister of the Crown,

(c) a government department,

(d) a Northern Ireland department,

(e) a foreign sovereign power,

(f) 40a designated educational establishment (within the meaning
given by section 106 of CTA 2009),

(g) a health service body (within the meaning given by section
986 of CTA 2010),

(h) a local authority or local authority association,

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(i) any other body that acts under any enactment for public
purposes and not for its own profit, or

(j) any wholly-owned subsidiary of any body falling within any
of the above paragraphs of this subsection.

(2) 5In this section “enactment” includes—

(a) an enactment contained in subordinate legislation within the
meaning of the Interpretation Act 1978,

(b) an enactment contained in, or in an instrument made under,
an Act of the Scottish Parliament,

(c) 10an enactment contained in, or in an instrument made under,
a Measure or Act of the National Assembly for Wales, and

(d) an enactment contained in, or in an instrument made under,
Northern Ireland legislation.

(3) The Commissioners may by regulations amend this section so as to
15alter the meaning of “relevant public body”.

(4) The provision that may be made by the regulations does not include
provision altering the meaning of “relevant public body” so that it
includes a person who has no functions of a public nature.

492 Meaning of “UK group company”

20 In this Part “UK group company”, in relation to any time during a
period of account of a worldwide group, means a company—

(a) which is within the charge to corporation tax at that time, and

(b) which is a member of the group at that time.

493 Embedded derivatives

25 Sections 415 and 585 of CTA 2009 (loan relationships with embedded
derivatives) apply for the purposes of this Part of this Act.

494 Other interpretation

(1) In this Part—

  • “the Commissioners” means the Commissioners for Her
    30Majesty’s Revenue and Customs;

  • “fair value accounting” means a basis of accounting under
    which—

    (a)

    assets and liabilities are measured in the company’s
    balance sheet at their fair value, and

    (b)

    35changes in the fair value of assets and liabilities are
    recognised as items of profit or loss;

  • “fair value” has the meaning it has for accounting purposes;

  • “finance lease”, in relation to a company or a worldwide group,
    means a lease that, in accordance with generally accepted
    40accounting practice, falls (or would fall) to be treated as a
    finance lease or loan in the accounts of the company or the
    financial statements of the group;

  • “interest restriction return” means a return submitted under
    any provision of Schedule 7A;

  • 45“reporting company” means a company which is for the time
    being appointed under any provision of Schedule 7A;

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  • “the return period”, in relation to an interest restriction return
    of a worldwide group, means the period of account of the
    group to which the return relates;

  • “service concession arrangement” has the meaning given by
    5international accounting standards;

  • “wholly-owned subsidiary” has the meaning given by section
    1159(2) of the Companies Act 2006.

(2) For the purposes of this Part a person who is not a company is
regarded as being a party to a loan relationship if the person would
10be so regarded for the purposes of Part 5 of CTA 2009 if the person
were a company.

Regulations
495 Financial statements: different treatment by group or members

(1) The Commissioners may make regulations for the purpose of
15altering any calculation under Chapter 7 where—

(a) the financial statements of a worldwide group for a period
include or omit an amount in respect of any matter, and

(b) any member of the group deals with that matter for tax or
accounting purposes in a different way.

(2) 20The regulations—

(a) may make provision subject to an election or other specified
circumstances, and

(b) may make provision having effect in relation to any period
beginning before the regulations are made if the period
25begins at some time in the calendar year in which the
regulations are made.

496 Parties to capital market arrangements

(1) The Commissioners may make regulations entitling—

(a) a UK group company which has a liability to corporation tax
30as a result of this Part and which is a party to a capital market
arrangement, and

(b) another UK group company,

to make a joint election transferring the liability to the other UK
group company.

(2) 35The regulations may include provision—

(a) specifying other conditions that must be met for an election
to be made,

(b) requiring an election to be made on or before a particular
time (for example, before the accounting period for which the
40liability arises),

(c) authorising or requiring an officer of Revenue and Customs
(on the exercise of a discretion or otherwise) to accept or
reject an election,

(d) authorising or requiring an officer of Revenue and Customs
45(on the exercise of a discretion or otherwise) to revoke an
election previously in force and dealing with the effect of the
revocation, and

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(e) dealing with the effect of the transfer of the corporation tax
liability on any other liabilities that relate to the transferred
corporation tax liability.

(3) In this section “capital market arrangement” has the same meaning
5as in section 72B(1) of the Insolvency Act 1986 (see paragraph 1 of
Schedule 2A to that Act).

497 Change in accounting standards

(1) The Treasury may by regulations amend this Part to take account of
a change in the way in which amounts are, or may be, presented or
10disclosed in financial statements where the change results from the
issue, revocation, amendment or recognition of, or withdrawal of
recognition from, an accounting standard by an accounting body.

(2) For this purpose—

  • “accounting standard” includes any statement of practice,
    15guidance or other similar document, and

  • “accounting body” means—

    (a)

    the International Accounting Standards Board (or
    successor body), or

    (b)

    the Accounting Standards Board (or successor body).

(3) 20The regulations—

(a) may make provision subject to an election or other specified
circumstances, and

(b) may make provision having effect in relation to any period
beginning before the regulations are made if the change
25mentioned in subsection (1) is relevant to that period.

(4) A statutory instrument containing regulations which are capable of
increasing the liability of a company to corporation tax may not be
made unless a draft of the instrument is laid before, and approved by
a resolution of, the House of Commons.

498 30Regulations

Regulations under this Part may—

(a) make different provision for different cases or circumstances,

(b) include supplementary, incidental and consequential
provision, or

(c) 35make transitional provision and savings.”

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Part 2 New Schedule 7A to TIOPA 2010

2 In TIOPA 2010, after Schedule 7 insert—

Schedule 7A Section 374 5Interest restriction returns

Part 1 The reporting company
Appointment by a worldwide group of a reporting company

1 (1) A member of a worldwide group may, by notice to an officer of
10Revenue and Customs, appoint an eligible company to be the
group’s reporting company.

(2) The notice must specify the first period of account of the group
(“the specified period of account”) in relation to which the
appointment is to have effect.

(3) 15An appointment under this paragraph has effect in relation to—

(a) the specified period of account, and

(b) subsequent periods of account of the group.

(4) The notice is of no effect unless—

(a) it is given during the period of six months beginning with
20the end of the specified period of account,

(b) it is authorised by at least 50% of eligible companies, and

(c) it is accompanied by a statement containing the required
information.

(5) For this purpose “the required information” means—

(a) 25a list of the eligible companies that have authorised the
notice, and

(b) a statement that the listed companies constitute at least
50% of eligible companies.

(6) The notice may be accompanied by a statement that such of the
30companies listed under sub-paragraph (5)(a) as are specified in the
statement do not wish to be consenting companies in relation to
returns submitted by the reporting company.

(7) 35For the purposes of this paragraph a company is “eligible” if and
only if the company —

(a) was a UK group company at a time during the specified
period of account, and

(b) was not dormant throughout that period.

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Revocation by worldwide group of appointment under paragraph 1

2 (1) A member of a worldwide group may, by notice to an officer of
Revenue and Customs, revoke an appointment previously made
under paragraph 1.

(2) 5The notice must specify the first period of account of the group
(“the specified period of account”) in relation to which the
appointment is to be revoked.

(3) An appointment that is revoked under this paragraph ceases to
have effect in relation to—

(a) 10the specified period of account, and

(b) subsequent periods of account of the group.

(4) The notice is of no effect unless—

(a) it is given during the period of six months beginning with
the end of the specified period of account,

(b) 15it is authorised by at least 50% of eligible companies, and

(c) it is accompanied by a statement containing the required
information.

(5) For this purpose “the required information” means—

(a) a list of the eligible companies that have authorised the
20notice, and

(b) a statement that the listed companies constitute at least
50% of eligible companies.

(6) The revocation of an appointment does not prevent the making of
a further appointment under paragraph 1 (whether at the same
25time as the revocation, or later).

(7) For the purposes of this paragraph a company is “eligible” if and
only if the company —

(a) was a UK group company at a time during the specified
period of account, and

(b) 30was not dormant throughout that period.

Regulations supplementing paragraphs 1 and 2

3 The Commissioners may by regulations make further provision
about an appointment under paragraph 1 or the revocation of such
an appointment under paragraph 2, including in particular
35provision—

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

(b) requiring a person to give information to an officer of
Revenue and Customs in connection with the making of an
40appointment or revocation;

(c) prohibiting a company from being appointed unless it
meets conditions specified in the regulations;

(d) about the time from which an appointment or revocation
has effect;

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(e) providing that an appointment or revocation is of no effect,
or (in the case of an appointment) ceases to have effect, if a
requirement under the regulations is not met.

Appointment of reporting company by Revenue and Customs

4 (1) 5This paragraph applies where—

(a) no appointment of a reporting company under paragraph
1 has effect in relation to a period of account of a
worldwide group (“the relevant period of account”), and

(b) as a result of sub-paragraph (4)(a) of that paragraph, an
10appointment of a reporting company under that
paragraph that has effect in relation to the relevant period
of account is no longer possible.

(2) An officer of Revenue and Customs may, by notice to an eligible
company, appoint it to be the group’s reporting company.

(3) 15The notice must specify the relevant period of account (whether
by specifying the dates on which it begins and ends or, if the
officer does not have that information, by reference to a date or
dates).

(4) The appointment has effect in relation to the relevant period of
20account.

(5) The appointment may be made—

(a) at any time before the end of the period of 36 months
beginning with the end of the relevant period of account,
or

(b) 25at any time after the end of that period if, at that time, an
amount stated in the company tax return of a UK group
company for a relevant accounting period can be altered.

(6) Paragraph 88(3) to (5) of Schedule 18 to FA 1998 (meaning of “can
no longer be altered”) applies for the purposes of this paragraph.

(7) 30For the purposes of this paragraph a company is “eligible” if and
only if the company —

(a) was a UK group company at a time during the relevant
period of account, and

(b) was not dormant throughout that period.

35Appointment by officer of Revenue and Customs of replacement reporting company

5 (1) This paragraph applies where—

(a) an appointment of a reporting company under paragraph
1 or 4 or this paragraph has effect in relation to a period of
account of a worldwide group (“the relevant period of
40account”), and

(b) condition A or B is met.

(2) Condition A is that an officer of Revenue and Customs considers
that the reporting company mentioned in sub-paragraph (1)(a) has
not complied with, or will not comply with, a requirement under
45or by virtue of this Schedule.