If your group treats any subsidiary as 'held for sale' you'll find it challenging to prepare your Corporate Interest Restriction ('CIR') analysis. That challenge arises because you're required to treat such a subsidiary as a standalone company for CIR purposes (or, if that subsidiary has subsidiaries of its own, to treat it as the parent of its own CIR group. This would require identifying the specific results of the subsidiary/subgroup concerned, when in many cases they're still consolidated in those of the worldwide group. It also requires identifying the specific date of the deemed departure, which may be unclear.
Graham Robinson, Partner in our International & Treasury Tax Network and CIR specialist, recently drew these challenges to HMRC's attention. In response, HMRC have said that they only intended this deemed degrouping provision to apply when the company or subgroup was shown as a 'discontinued operation' in the consolidated accounts. In such circumstances there would be a separate column in the income statement which could be used to show the results for that company/subgroup. HMRC will therefore publish guidance to state that they will accept that companies/subgroups classed as 'available for sale' continue to be part of their parent's group for CIR purposes until that sale is so advanced as to be reported as 'discontinued' [for statutory accounting purposes.
Whilst this does not address all the challenges, it does ease matters for groups that find themselves in this situation. However, until HMRC officially publish their guidance on this, anyone relying on the statement made by HMRC to PwC must state that fact on their return. It's also important to remember that, even when officially published, taxpayers are still entitled to follow the letter of the law if they prefer to do so.
Please get in touch with Graham Robinson or your usual PwC contact to find out more.
