CFM98480 - Interest restriction: administration: reporting requirements: appointment by HMRC

TIOPA10/SCH7A/PARA4

TIOPA10/SCH7A/PARA4 allows HMRC to appoint a reporting company for a period of account of a worldwide group. This may not be done when an appointment by the group has effect, whether in the period of account for which the reporting company was appointed or a later period where that appointment continues to have effect. The appointment cannot be made within the time limit for appointment by the group. It follows that, in practice, an appointment by HMRC is most likely to be made more than 12 months after the end of a period account for which there is no valid appointment.

An appointment by HMRC may be made at any time up to four years after the end of the period of account.

A later appointment is permitted where an amount in a company tax return is still capable of being altered - see FA98/SCH18/PARA88. This is most likely to be the case where there is an open enquiry into a company tax return. HMRC may also appoint a reporting company where new groups are identified in the course of an enquiry.

The company appointed must be a UK group company for at least part of the period of account and must not be dormant.

It is possible that HMRC will be uncertain what the correct period of account is. Accordingly the appointment can be made by reference to a date or dates that would begin, end or be contained within a period of account.

An appointment by HMRC is valid only for the period of account to which it relates. Unlike an appointment by the group, it does not carry forward to later periods. So, if the group wished to continue to have a reporting company, it would need to make its own appointment for a later period, which would then continue to have effect for subsequent periods of account unless revoked or invalid.

Where HMRC has appointed a reporting company, all group companies will be regarded as non-consenting and subject to the pro-rata apportionment of any disallowance (CFM98590), unless the companies advise HMRC that they are consenting companies (CFM98570).

Many groups will not be subject to a CIR disallowance. This may be because the group is small enough that its aggregate net tax-interest expense (ANTIE) falls below the de minimis limit of £2m per annum or because tax-EBITDA and net group-interest expense (NGIE) are sufficiently high in relation to ANTIE, thereby resulting in no CIR disallowance arising. HMRC will not appoint reporting companies on a routine or speculative basis.

Where a group has not appointed a reporting company but a CIR disallowance arises, any UK group company with a net tax-interest expense is required to apply a CIR disallowance computed on a pro-rata basis in its company tax return for any relevant accounting period (CFM98635) - see CFM98654.