31 March 2018 is the deadline for some groups to appoint a ‘reporting company’ for the purposes of the new corporate interest restriction (CIR) regime. It is also the deadline for making certain CIR elections, including the notional disregard regulations election, two elections altering the group’s period of account, and the public infrastructure election. In this article, we take a look at these elections, as well as HMRC’s proposed digital solution for submitting them.
Appointment of reporting company: 31 March 2018 is the deadline for groups with a first CIR period of account ending on or before 30 September 2017 to appoint a ‘reporting company’. This will be relevant where the group accounts are drawn up to a date in the period from 1 April 2017 to 30 September 2017.
Notional disregard regulations election: 31 March 2018 is the deadline for an election allowing UK companies that have not actually elected to apply the disregard regulations (to adjust the amounts recognised for tax purposes in respect of derivatives performing a hedging function) to notionally do so for purposes of calculating their ‘tax-interest’ and ‘tax-EBITDA’ for CIR purposes. This can potentially:
reduce volatility in these amounts;
align the calculation of these amounts with the group’s group-interest and group-EBITDA (for purposes of the debt cap and group ratio method); and
prevent the transition to the new CIR rules from 1 April 2017 from triggering excessive CIR disallowances.
Elections altering the group’s period of account: The CIR rules are applied with reference to the period of account of the worldwide group. 31 March 2018 may also be the deadline for two elections that can alter a worldwide group’s period of account for CIR purposes, where the ultimate parent does not prepare consolidated financial statements. It may be beneficial to consider making these elections in order to align the group’s period of account for CIR purposes with individual UK group companies’ corporation tax accounting periods, so as to reduce the need for apportionments to be performed.
Public infrastructure election: For any accounting periods ending on or before 31 March 2018, this will also be the deadline for a company to make the public infrastructure election. Companies involved in the provision of qualifying public infrastructure or short-term letting of property will want to consider whether to make this election. Broadly speaking, where qualifying conditions are met, this allows interest expenses on limited recourse third party debt (and some grandfathered related party debt) to be excluded in calculating the group’s tax-interest and group-interest (and therefore effectively exempted from disallowance under the CIR rules), at the cost of the interest income amounts and EBITDA being disregarded in calculating the group’s tax-interest, aggregate tax-EBITDA and group-EBITDA.
Digital submission of CIR documents: In terms of how such notifications and elections are submitted, we understand that HMRC is developing a digital solution for the submission of these documents; and will be issuing further guidance on this before the end of February. Groups without customer compliance managers are therefore advised to hold off submitting any such documents to HMRC until after the guidance is published, if possible. ■
Rob Norris & Richard Rudman, KPMG (KPMG’s Tax Matters Digest)
31 March 2018 is the deadline for some groups to appoint a ‘reporting company’ for the purposes of the new corporate interest restriction (CIR) regime. It is also the deadline for making certain CIR elections, including the notional disregard regulations election, two elections altering the group’s period of account, and the public infrastructure election. In this article, we take a look at these elections, as well as HMRC’s proposed digital solution for submitting them.
Appointment of reporting company: 31 March 2018 is the deadline for groups with a first CIR period of account ending on or before 30 September 2017 to appoint a ‘reporting company’. This will be relevant where the group accounts are drawn up to a date in the period from 1 April 2017 to 30 September 2017.
Notional disregard regulations election: 31 March 2018 is the deadline for an election allowing UK companies that have not actually elected to apply the disregard regulations (to adjust the amounts recognised for tax purposes in respect of derivatives performing a hedging function) to notionally do so for purposes of calculating their ‘tax-interest’ and ‘tax-EBITDA’ for CIR purposes. This can potentially:
reduce volatility in these amounts;
align the calculation of these amounts with the group’s group-interest and group-EBITDA (for purposes of the debt cap and group ratio method); and
prevent the transition to the new CIR rules from 1 April 2017 from triggering excessive CIR disallowances.
Elections altering the group’s period of account: The CIR rules are applied with reference to the period of account of the worldwide group. 31 March 2018 may also be the deadline for two elections that can alter a worldwide group’s period of account for CIR purposes, where the ultimate parent does not prepare consolidated financial statements. It may be beneficial to consider making these elections in order to align the group’s period of account for CIR purposes with individual UK group companies’ corporation tax accounting periods, so as to reduce the need for apportionments to be performed.
Public infrastructure election: For any accounting periods ending on or before 31 March 2018, this will also be the deadline for a company to make the public infrastructure election. Companies involved in the provision of qualifying public infrastructure or short-term letting of property will want to consider whether to make this election. Broadly speaking, where qualifying conditions are met, this allows interest expenses on limited recourse third party debt (and some grandfathered related party debt) to be excluded in calculating the group’s tax-interest and group-interest (and therefore effectively exempted from disallowance under the CIR rules), at the cost of the interest income amounts and EBITDA being disregarded in calculating the group’s tax-interest, aggregate tax-EBITDA and group-EBITDA.
Digital submission of CIR documents: In terms of how such notifications and elections are submitted, we understand that HMRC is developing a digital solution for the submission of these documents; and will be issuing further guidance on this before the end of February. Groups without customer compliance managers are therefore advised to hold off submitting any such documents to HMRC until after the guidance is published, if possible. ■
Rob Norris & Richard Rudman, KPMG (KPMG’s Tax Matters Digest)
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