Taxation (International and Other Provisions) Act 2010

[F1 Financial statements and periods of account U.K.

Textual Amendments

F1 Pt. 10: the existing Pt. 10 renumbered as Pt. 11 (except for ss. 375, 376 which are repealed), the existing ss. 372-374, 377-382 renumbered as ss. 499-507 and a new Pt. 10 (ss. 372-498) inserted (with effect in accordance with Sch. 5 para. 25(1)-(3) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 1, 10(1)(2)(a)(3) (with Sch. 5 paras. 27, 32-34)

479 “Financial statements” of a worldwide group U.K.

(1) References in this Part to “financial statements” of a worldwide group for a period are (subject to subsection (2)) to consolidated financial statements of the worldwide group's ultimate parent and its subsidiaries in respect of the period.

(2) Where the worldwide group is at all times during the period a single-company worldwide group, the references are to financial statements of the ultimate parent in respect of the period.

(3) The basic rule is that the references mentioned in subsections (1) and (2) are to financial statements that are drawn up by or on behalf of the ultimate parent.

(4) But see—

(a) section 481 for provision under which, in specified circumstances, financial statements of a worldwide group are treated as having been drawn up in accordance with different accounting standards from those in accordance with which they are drawn up by or on behalf of the ultimate parent;

(b) section 482 for provision under which, in specified circumstances, financial statements of a worldwide group are treated as consolidating different subsidiaries from those consolidated in financial statements drawn up by or on behalf of the ultimate parent;

(c) section 483 for provision under which, in specified circumstances, financial statements of a worldwide group are treated as having been drawn up where the ultimate parent has drawn up consolidated financial statements covering more than one worldwide group;

(d) sections 484 to 486 for provision under which, where financial statements of a worldwide group are not drawn up by or on behalf of the ultimate parent, financial statements of the group are treated as having been drawn up.

(5) See also section 487 (under which financial statements drawn up by or on behalf of an entity, but for too long a period or too late, are ignored for the purposes of this Part).

480 “Period of account” of worldwide group U.K.

References in this Part to a “period of account” of a worldwide group are to—

(a) a period in respect of which financial statements of the group are drawn up by or on behalf of the ultimate parent, or

(b) a period in respect of which financial statements of the group are treated as drawn up for the purposes of this section (whether under any of sections 481 to 485 or under any other enactment).

481 Actual financial statements not drawn up on acceptable principles U.K.

(1) This section applies where financial statements of a worldwide group for a period drawn up by or on behalf of the ultimate parent are not drawn up on acceptable principles.

(2) For the purposes of this Part (apart from this section)—

(a) the financial statements mentioned in subsection (1) are to be ignored, and

(b) IAS financial statements of the worldwide group are treated as having been drawn up in respect of the period.

(3) For the purposes of this Chapter financial statements are “drawn up on acceptable principles” only if condition A, B, C or D is met.

(4) Condition A is that the financial statements are IAS financial statements.

(5) Condition B is that the amounts recognised in the financial statements are not materially different from those that would be recognised in IAS financial statements of the worldwide group, if such statements were drawn up.

(6) Condition C is that the financial statements are drawn up in accordance with UK generally accepted accounting practice.

(7) Condition D is that the financial statements are drawn up in accordance with generally accepted accounting principles and practice of one of the following territories—

(a) Canada;

(b) China;

(c) India;

(d) Japan;

(e) South Korea;

(f) the United States of America.

(8) The Commissioners may by regulations amend this section so as to alter the circumstances in which financial statements are “drawn up on acceptable principles” for the purposes of this Chapter.

482 Actual financial statements drawn up on acceptable principles but consolidating wrong subsidiaries U.K.

(1) This section applies where financial statements of a worldwide group for a period drawn up by or on behalf of the ultimate parent are drawn up on acceptable principles but—

(a) do not consolidate one or more entities that are IAS subsidiaries, or

(b) consolidate one or more entities that are not IAS subsidiaries.

(2) In this section “IAS subsidiary”, in relation to a period, means an entity which would be required to be consolidated with those of the ultimate parent in IAS financial statements of the group for the period.

(3) For the purposes of this Part (apart from this section)—

(a) the financial statements mentioned in subsection (1) are to be ignored, and

(b) consolidated financial statements of the ultimate parent and its IAS subsidiaries are treated as having been drawn up in respect of the period.

(4) The financial statements treated by subsection (3)(b) as drawn up are treated as drawn up in accordance with the same accounting principles and practice as the financial statements mentioned in subsection (1).

(5) In this section a reference to financial statements consolidating the results of an entity is to consolidating its results with those of the ultimate parent as the results of a single economic entity.

483 Actual financial statements covering more than one worldwide group U.K.

(1) This section applies where—

(a) consolidated financial statements of an entity and its subsidiaries are drawn up by or on behalf of the entity in respect of a period (“the actual period of account”), and

(b) the entity was the ultimate parent of a worldwide group for a part (but not all) of that period.

(2) For the purposes of this Part (apart from this section)—

(a) the financial statements mentioned in subsection (1)(a) are to be ignored, and

(b) consolidated financial statements of the entity and its IAS subsidiaries are treated as having been drawn up in respect of the part of the actual period of account mentioned in subsection (1)(b).

(3) The financial statements treated by subsection (2)(b) as drawn up are treated as drawn up—

(a) where the financial statements mentioned in subsection (1)(a) are drawn up on acceptable principles, in accordance with the same accounting principles and practice as those financial statements;

(b) otherwise, in accordance with international accounting standards.

(4) In this section “IAS subsidiary” has the same meaning as in section 482.

484 No actual financial statements: ultimate parent draws up financial statements U.K.

(1) Subsection (2) applies where—

(a) financial statements of the ultimate parent of a worldwide group are drawn up by or on behalf of the ultimate parent in respect of a period (“the relevant period”),

(b) consolidated financial statements of the ultimate parent and its subsidiaries are not drawn up by or on behalf of the ultimate parent in respect of the relevant period or any part of it, and

(c) the group was, at any time during the relevant period, a multi-company worldwide group.

(2) For the purposes of this Part (apart from this section) IAS financial statements of the worldwide group are treated as drawn up in respect of the relevant period.

(3) The ultimate parent may elect that subsection (2) is not to apply in relation to financial statements of the ultimate parent.

(4) An election under subsection (3)—

(a) has effect in relation to financial statements in respect of periods ending on or after such date as is specified in the election, and

(b) is irrevocable.

(5) The date specified in the election may not be before the day on which the election is made.

485 No actual financial statements: other cases U.K.

(1) In this section “accounts-free period” means (subject to subsection (2)) any period—

(a) which begins on or after 1 April 2017,

(b) throughout which a worldwide group exists, and

(c) in respect of no part of which are financial statements of the group—

(i) drawn up by or on behalf of the ultimate parent, or

(ii) treated as drawn up for the purposes of this section (whether under section 481, 482, 483 or 484 or any other enactment).

(2) A period is not an “accounts-free period” if it forms part of an accounts-free period.

(3) If an accounts-free period in relation to a worldwide group is 12 months or less, IAS financial statements of the worldwide group are treated for the purposes of this Part (apart from this section) as having been drawn up for the accounts-free period.

(4) If an accounts-free period in relation to a worldwide group is more than 12 months, IAS financial statements of the worldwide group are treated for the purposes of this Part (apart from this section) as having been drawn up for each of the following periods—

(a) the first period of 12 months falling within the accounts-free period;

(b) any subsequent period of 12 months falling within the accounts-free period;

(c) any period of less than 12 months which—

(i) begins immediately after the end of a period mentioned in paragraph (a) or (b), and

(ii) ends at the end of the accounts-free period.

486 Election altering period of account deemed under section 485 U.K.

(1) This section applies where, disregarding this section, IAS financial statements of a worldwide group would be treated under section 485(4)(a) or (b) as drawn up for a period (“the default period of account”) during an accounts-free period.

(2) The ultimate parent of the group may make an election under this section in relation to the default period of account.

(3) Where an election under this section is made, section 485 has effect as if subsection (4)(a) or (b) of that section—

(a) did not treat IAS financial statements of the group as having been drawn up for the default period of account;

(b) instead, treated IAS financial statements of the group as having been drawn up for the period—

(i) beginning with the day on which the default period of account begins (“the start day”), and

(ii) ending with such day after the start day as is specified in the election (“the end day”).

(4) The end day must—

(a) fall within the accounts-free period, and

(b) not be later than the final day of the period of 18 months beginning with the start day.

(5) An election under this section—

(a) must be made before the end day, and

(b) is irrevocable.

(6) The fact that the ultimate parent of a worldwide group makes an election under this section in relation to a default period of account (“the earlier elected period”) does not prevent it from making an election in relation to a later default period of account (“the later elected period”).

(7) But where it does so, the end day in relation to the later elected period must be 3 years or more after the end day in relation to the earlier elected period.

(8) Where this section modifies section 485(4)(a) or (b) so that it treats IAS financial statements of the group as having been drawn up for the period mentioned in subsection (3)(b) of this section (“the elected period”), section 485(4)(b) and (c) apply in relation to any part of the accounts-free period following the end of the elected period.

(9) In this section “accounts-free period” has the same meaning as in section 485.

487 Actual financial statements ignored if for too long a period or too late U.K.

Financial statements drawn up by or on behalf of any entity are to be ignored for the purposes of this Part (apart from this section) if—

(a) the period in respect of which they are drawn up is more than 18 months, or

(b) they are drawn up after the end of the period of 30 months beginning with the beginning of the period in respect of which they are drawn up.

488 Meaning of “IAS financial statements” U.K.

(1) References in this Part to “IAS financial statements” of a worldwide group for a period are (subject to subsection (2)) to consolidated financial statements of the worldwide group's ultimate parent and its subsidiaries, drawn up in respect of the period in accordance with international accounting standards.

(2) If the worldwide group is at all times during the period a single-company worldwide group, the references are instead to financial statements of the ultimate parent, drawn up in respect of the period in accordance with international accounting standards.

489 References to amounts recognised in financial statements U.K.

(1) References in this Part to an amount “recognised” in financial statements—

(a) include an amount comprised in an amount so recognised;

(b) are, where the amount is expressed in a currency other than sterling, to that amount translated into its sterling equivalent.

(2) The exchange rate by reference to which an amount is to be translated under subsection (1)(b) is the average rate of exchange for the period of account, calculated from daily spot rates.

(3) References in this Part to an amount recognised in financial statements “for a period” as an item of profit or loss include references to an amount that—

(a) was previously recognised as an item of other comprehensive income, and

(b) is transferred to become an item of profit or loss in determining the profit or loss for the period.]