Pre-Budget Report – Worldwide Debt Cap
The Chancellor has announced that further changes will be made to the financing expenses and income of UK companies (worldwide debt cap ) in the Finance Bill 2010. It is expected that the changes will take effect for periods of account of the worldwide group beginning on or after 1 January 2010.
The proposed changes include:
- eliminating mismatches in the application of the “gateway test” caused by different accounting treatments of the same debt in single entity accounts and consolidated accounts
- excluding securitisation companies from the debt cap rules
- eliminating mismatches between the computation of UK financing costs and worldwide financing costs where borrowing is undertaken by a partnership, including a limited liability partnership
- restricting the allocation of disallowances under the debt cap to group companies which are dual resident investment companies
- allowing other companies to elect that no disallowance shall be allocated to them
- amending the definition of a group treasury company to prevent an anomalous result where other companies in the group have income from treasury activities
- including guarantee fees received from other group companies in a company’s financing income and
- widening the definition of a collective investment scheme to prevent the automatic exclusion of overseas partnerships which are, legally, bodies corporate.