Introduction Details of the Schedule Part 10 – Other Interpretative provisions
178.Part 10 contains the rules that define which companies make up a group for the purpose of this Schedule and which companies are treated as ‘relevant group companies’ and ‘UK group companies’. This part also explains which accounting standards used to prepare the group consolidated financial statements are acceptable for this Schedule and provides for cases where no such financial statements are prepared.
179.Paragraph 78 defines ‘the worldwide group’ as any group of entities that is large (see Paragraph 85) and contains at least one company that is tax resident in the UK.
180.Paragraph 79 provides that the term ‘group’ takes it meaning from IAS. This establishes that the ‘worldwide group’ defined in paragraph 78 will in the majority of cases be the group of companies whose results are included in the consolidated accounts of the group headed by the ultimate parent.
181.Paragraph 79(3) excludes an entity that is a parent of the ultimate parent of a group from being a member of that group. This means that, unless otherwise provided, the worldwide group whose finance expenses will be compared with the finance expenses of UK members of the group will be limited to the ultimate parent and its subsidiaries.
182.Paragraph 80 defines the ‘ultimate parent’. The ultimate parent is a member of a group that is either an entity treated as a ‘corporate entity’ or a ‘relevant non-corporate entity’ for the purposes of the Schedule and which is not itself a subsidiary of a corporate entity or a relevant non-corporate entity or a collective investment scheme. A group may contain a number of intermediate parent companies and this rule is intended to identify the top parent company in the group.
183.Paragraph 81 provides that for the purposes of the Schedule a ‘corporate entity’ is either a body corporate under the law of the UK or any other territory, or any another entity that meets two conditions. The two conditions in sub-paragraphs (2) and (3) are formulated by reference to essential characteristics of a body corporate.
184.Sub-paragraph (4) excludes the UK and foreign governments from the definition of ‘corporate entity’.
185.Paragraph 82 defines ‘relevant non-corporate entity’. Some publicly listed entities that are not corporate entities can be the ultimate parent of a worldwide group. A “relevant non-corporate entity” must have shares or other interests that are listed on a recognised stock exchange and sufficiently widely held.
186.Paragraph 83 provides that where interests in a corporate or relevant non-corporate entity are stapled to another entity they will be treated as a single corporate or non-corporate entity for the purposes of the Schedule. This provides that the stapled entities and their respective subsidiaries will together be treated as one worldwide group. Subparagraph (3) defines ‘stapled’ by reference to the nature of the rights attaching to the shares or other interests which one entity has in another.
187.Paragraph 84 treats entities as one corporate entity for the purposes of the Schedule where international accounting standards treat them as a single economic entity by reason of being a business combination achieved by contract. This covers dual headed groups which are not accounted for as an acquisition.
188.Paragraph 85 defines large groups by excluding micro, small and medium enterprises as defined in the Annex to European Commission Recommendation 2003/361/EC of 6 May 2003.
189.Sub-paragraphs (1) and (2) incorporate the Annex for the purposes of deciding whether a business is micro, small or medium sized at any time, with certain qualifications. The effect of paragraph 85(1) is that provided at least one member of the worldwide group is a large company by reference to the definition in the Annex, then the worldwide group is large and the Schedule applies to all the UK members of that group that satisfy the definition of relevant group company.
190.Sub-paragraph (3) provides that the rights and powers of liquidators and administrators will not by themselves result in the loss of an exemption for small and medium sized enterprises under their charge. The Annex provides qualifying ceilings for staff and financial limits. In order to see if a business meets these ceilings, its own data must be aggregated with the data for associated businesses. This paragraph ensures that aggregation is not required by virtue solely of the appointment of a liquidator or administrator.
191.Sub-paragraph (4) removes the option to make a declaration of status when a business cannot ascertain the extent of control over its associated businesses when aggregating data.
192.Sub-paragraphs (5) and (6) simplify the application of the recommendation when deciding whether a business will qualify as small or medium. Qualification will depend on a business’s data for each chargeable period without reference to past history. This simplification also means that it is not necessary to provide additional start-up rules for new businesses.
193.Paragraph 86 defines ‘UK group company’ and ‘relevant group company’.
194.Sub-paragraph (2) provides that a UK group company is one which is
	a UK resident company or a company carrying on a trade in the UK through a branch (see sub-paragraph (4)), and
	a member of the worldwide group. It is a member of the worldwide group if it a subsidiary of the ultimate parent.
195.Sub-paragraph (3) provides that a relevant group company is a UK group company which is:
	a UK resident company or a company carrying on a trade in the UK through a branch (see sub-paragraph (4)), and is either
	the ultimate parent of the group, or a relevant subsidiary of the ultimate parent (see sub-paragraph (5)).
196.Sub-paragraph (6) provides that the relevant subsidiary condition is based on the 75% subsidiary test used for group relief. It is supplemented by rules that ensure that a company is also treated as a relevant subsidiary of an ultimate parent where that entity is beneficially entitled to at least 75% of the profits which are available for distribution to equity holders, or 75% of the assets which are available for distribution to equity holders in the course of a winding up.
197.Paragraph 87 provides for which consolidated financial statements of the worldwide group are used in applying the Schedule and provides that the period of account of the worldwide group is the period for which those accounts are drawn up. Amounts disclosed in the financial statements of the worldwide group for a period form the basis of the amount against which the Schedule compares the net finance deductions of UK members of the group to calculate the amount of any disallowance.
198.Paragraph 88 applies where the consolidated financial statements of the worldwide group for a period are not ‘acceptable’ and the amounts disclosed in those financial statements are materially different from those that would have been disclosed under IAS. Where the paragraph applies, the Schedule will apply as if the group had prepared consolidated financial statements under IAS for the period.
199.Sub-paragraph (3) provides that financial statements are ‘acceptable’ if:
	they are drawn up in accordance with international accounting standards;
	they meet conditions relating to accounting standards, principles or practice that the Commissioners may specify in regulations; or
	they meet the conditions set out in sub-paragraphs (4) to (6)
200.Sub-paragraphs (4) to (6) set out conditions A to C that financial statements must meet in order to be acceptable. They are that:
	(Condition A) the companies whose results are included in the financial statements must be the same as those that would have been included in financial statements drawn up under IAS; and
	(Condition B) the transactions whose results are relevant to the computation of the available amount under Part 9 included in the financial statements must be the same as those that would have been included in financial statements drawn up under IAS; and
	(Condition C) the amounts which are relevant to the computation of the available amount under Part 9 which are taken from those financial statements are calculated using the effective interest method.
201.Paragraph 89 provides how the Schedule will apply where consolidated financial statements of an ultimate parent and its subsidiaries are not prepared. The paragraph provides that the Schedule will apply as if financial statements had been drawn up under IAS. That is, the Schedule will apply on the basis that particular amounts taken into consideration in Part 9 (calculation of the available amount) will be those that would have been disclosed had the group drawn up consolidated financial statements in accordance with IAS.
202.Sub-paragraphs (2) – (4) provide rules that establish the period of account for the worldwide group where no consolidated financial statements are prepared.
203.Paragraph 90 sets out what is meant by ‘amounts disclosed in group’s financial statements’. Such amounts may include amounts comprised in a larger disclosed amount, and include an amount disclosed in a joint venture that is a member of the group, however presented. Sub-paragraph (2) excludes capitalised amounts that are disclosed in the financial statements of the group for a period where they have already been included in the balance sheet of the group for an earlier period. Sub-paragraph (3) excludes amounts in respect of group pension schemes or any entity that is not a member of the group.
204.Paragraph 91 deals with the currency denomination: all non-sterling denominated amounts are to be converted into sterling at the average rate of exchange for that accounting period.
205.Paragraph 92 provides for specified terms within the Schedule to take their meaning for the purposes of the Schedule from the definition given to them, for the time being, by IAS.
206.Sub-paragraph (2) provides that the paragraph may be amended by regulation.
207.Paragraph 93 defines a ‘relevant accounting period’ of a company as any accounting period that fall wholly or partly within the period of account of the worldwide group.
208.Paragraph 94 defines ‘the Commissioners’, ‘the FSA Handbook’ and ‘HMRC’ for the purposes of the Schedule.