CFM90300 - Debt cap; groups affected; meaning of 'relevant non-corporate entity'

This guidance applies to worldwide group periods of account ending before or straddling 1 April 2017.

Ultimate parent must be either a corporate or relevant non-corporate entity

Partnerships and other unincorporated bodies are capable of being both parents and subsidiaries under International Accounting Standards (IAS) and so can be part of the worldwide group, except where the debt cap rules contain provisions to the contrary. If, for example, one or more members of a group are partners in a partnership and have a controlling interest, then that partnership and any other companies that it owns will form part of the worldwide group for the purposes of the debt cap. However, entities that are not corporate entities (see CFM90290) can only be the ultimate parent of a worldwide group where they meet the definition of relevant non-corporate entity inTIOPA10/S341.

To be a relevant non-corporate entity an entity must:

• have shares or other interests that are listed on a recognised stock exchange; and
• those shares or other interests must be sufficiently widely held.

For the purposes of the Corporation Tax Acts, a recognised stock exchange is defined at CTA10/S1137(1):

• Within the UK, a recognised stock exchange is any market of a recognised investment exchange which has been designated as a recognised stock exchange by a commissioner of HMRC (CTA10/S1137(1)(a));
• Outside the UK a recognised stock exchange is any market that has been so designated (CTA10/S1137(1)(b)).

Tables of recognised stock exchanges may be found at .

For the purposes of this provision, shares or other interests in an entity are ‘sufficiently widely held’ if no participator owns more than 10% by value of all the shares or other interests in the entity (TIOPA10/S341(4)). Participator in this context has the meaning given by CTA10/S454 with the exception that references in that section to a company are to be read as references to an entity (see CTM60107).

The definition of the worldwide group in the debt cap rules is designed as far as possible to cover a group that as a matter of economic and commercial reality forms one enterprise. Some very large groups are headed by partnerships and interests in those partnerships are publicly held and traded. In this situation, the partnership clearly does form part of the same economic unit as the rest of the group. The debt cap rules ensure it is capable of being the ultimate parent of a worldwide group if it meets the two conditions above.