CFM98570 - Interest restriction: administration: reporting requirements: consenting and non-consenting companies

TIOPA10/SCH7A/PARA10, 11

The definition of a worldwide group in TIOPA10/S473 is based on IFRS accounting. This means there may be entities in a worldwide group with substantial external stakeholders over which the ultimate parent does not have unfettered control. This leaves open the possibility of conflicts of interest between different members of a group. The CIR legislation contains provisions to enable such potential conflicts to be managed.

In particular, it is appropriate that UK group companies should have protection against, say, a disproportionately high allocation of the group’s disallowances. But, by way of balance, it should not be possible for a dissenting group member to disrupt efficient administration by a reporting company. The concept of consenting and non-consenting companies (TIOPA10/SCH7A/PARA10) seeks to achieve such a balance.

Broadly speaking, a consenting company is a company that has agreed to accept and be bound by discretionary apportionments of tax-interest by the reporting company. A non-consenting company has not so agreed. Its basic protections are that it may not be apportioned more than its pro-rata share (PARA23) of the group’s total disallowed amount, and may elect to file on a basis that differs from that in the group’s interest restriction return (TIOPA10/S375(3)).

According to PARA10(2), a company is a consenting company in relation to a worldwide group’s interest restriction return if it has notified the reporting company and HMRC to this effect and has not also notified the reporting company and HMRC that it no longer wishes to so consent. To simplify administration, PARA11 treats a company as having made the necessary notifications where it is listed as a company that has authorised the appointment of a reporting company and has not indicated that it wished to be treated as non-consenting company. This is the case even if the appointment was originally made for an earlier period of account, but is still in effect. Thus a company that joins the CIR group in a later period of account will need to inform HMRC that it is a consenting company or authorise the reporting company to do so.

Any company that has not taken the steps that would make it a consenting company will be a non-consenting company (PARA10(4)).

Irrespective of whether a company became a consenting company by giving specific consent, or by consenting to appointment of the reporting company, it may become a non-consenting company by notifying the reporting company and HMRC to this effect (PARA10(2)(b)). Equally, a company that was treated as a non-consenting company may cease to be so, in relation to future interest restriction returns, including revised returns, by notifying the reporting company and HMRC to this effect.

It is also open to a non-consenting company to elect (under S375(3)), that it does not accept the allocated disallowance. It must then submit or amend its company tax return for each relevant period of account to include its own computation of the disallowance due, on a pro-rata basis.

Consenting or non-consenting notifications may be included in the interest restriction return, or sent to the group’s HMRC Customer Compliance Manager, or by email to: [email protected]