Budget 2010 – Worldwide Debt Cap
The Chancellor has announced changes to the “worldwide debt” cap in addition to those which had been announced in the 2009 Pre-Budget report. The worldwide debt cap works by restricting relief for UK financing costs where these costs exceed the financing costs of the worldwide group.
It is expected that most of the changes will take effect for worldwide accounting periods beginning on or after 1 January 2010.
The proposed changes include:
Two measures specifically relating to securitisation.
The taking into account of assets and liabilities of companies for the “gateway test” will include long-term arrangements that have the economic effect of loans and which give rise to an interest-like return, even where these do not have the legal form of loans
Clear guidance that a limited liability partnership cannot be the ultimate parent of a group of companies for debt cap purposes
Any distributions made by industrial and provident societies, which are normally treated as interest for tax purposes, will be excluded from the financing expenses of such companies.