The Corporate Interest Restriction (Financial Statements: Group Mismatches) Regulations 2017

Loan relationship accounted for at fair value

2.—(1) This regulation applies where on 1 April 2017 a company is a party to a loan relationship which is dealt with—

(a) in the company’s accounts on an amortised cost basis of accounting, and

(b) in the financial statements(1) of the worldwide group of which the company is a member—

(i) on the basis of fair value accounting(2), or

(ii) as a hedged item in a designated fair value hedge where the carrying value of the hedged item is adjusted for changes in fair value attributable to the hedged risk.

(2) For the purpose of calculating the specified amounts, the financial statements of the worldwide group are treated, in relation to the loan relationship, as having been drawn up on an amortised cost basis of accounting.

(3) In this regulation, “amortised cost basis of accounting”, in relation to a company’s loan relationship, means a basis of accounting under which an asset or liability representing the loan relationship is measured in the company’s balance sheet at its amortised cost using the effective interest method.

(4) In paragraph (3), “effective interest method” has the meaning given by international accounting standards.

(1)

“Financial statements” of a worldwide group is defined in section 479 of the Taxation (International and Other Provisions) Act 2010, which was inserted by paragraph 1 of Schedule 5 to the Finance (No. 2) Act 2017.

(2)

“Fair value accounting” is defined in section 494 of the Taxation (International and Other Provisions) Act 2010, which was inserted by paragraph 1 of Schedule 5 to the Finance (No. 2) Act 2017.