CFM90700 - Debt cap: gateway test: calculation of worldwide gross debt

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

calculation of worldwide gross debt {#}

The worldwide comparator for the gateway test is the worldwide gross debt.

For any period of account of the worldwide group, the worldwide gross debt is the average of the group’s consolidated relevant liabilities (see CFM90710) at the end of the period of account and at the end of the previous period of account (TIOPA10/S264(1) ).

The calculated figure of worldwide gross debt cannot be negative.

So if the relevant liabilities for a group for the year ended 31 December 2011 are £250 million and for the year ended 31 December 2012 are £350 million, the worldwide gross debt for the period of account ended 31 December 2012 is £300 million.

Repeal of the worldwide debt cap rules

From 1 April 2017 the worldwide debt cap rules are repealed and replaced with the corporate interest restriction (CIR).

Guidance on the new rules is available online at:

https://www.gov.uk/government/publications/corporate-interest-restriction-draft-guidance

Where the group draws up accounts for a period that straddles 1 April 2017, it is treated for the purposes of the existing debt cap as if it had drawn up accounts for a period ending on 31 March 2017. Accordingly, where a company’s accounting period overlaps 1 April 2017, 31 March 2017 is substituted for the date to which the accounts are drawn up - F(No.2)A17/SCH5/PARA26(2).