263Net debt of a companyU.K.
(1)References in section 262 to the “net debt” of a company as at any date are to—
(a)the sum of the company's relevant liabilities as at that date, less
(b)the sum of the company's relevant assets as at that date.
(2)The amount determined in accordance with subsection (1) may be a negative amount.
[F1(3)For the purposes of this section, a company's “relevant liabilities” as at any date are the amounts that are disclosed in the balance sheet of the company as at that date in respect of—
(a)borrowing (whether short term or long term and including borrowing by way of overdraft),
(b)liabilities in respect of finance leases,
(c)arrangements not within paragraph (a) or (b) that—
(i)are financial liabilities,
(ii)produce for any person a return in relation to any amount which is economically equivalent to interest, and
(iii)are not short term, or
(d)such other matters as may be specified in regulations made by the Commissioners.
(4)For the purposes of this section, a company's “relevant assets” as at any date are the amounts that are disclosed in the balance sheet of the company as at that date in respect of—
(a)cash and cash equivalents,
(b)lending (whether short term or long term and including lending by way of overdraft),
(c)net investments, or net cash investments, in finance leases,
(d)securities issued by—
(i)the government of the United Kingdom or any territory outside the United Kingdom,
(ii)any public or local authority in the United Kingdom or any territory outside the United Kingdom, or
(iii)any company or other body of persons,
(e)arrangements not within paragraphs (b) to (d) that—
(i)are financial assets,
(ii)produce for the company a return in relation to any amount which is economically equivalent to interest, and
(iii)are not short term, or
(f)such other matters as may be specified in regulations made by the Commissioners.
[F2(4A)For the purposes of subsections (3) and (4), if the company is one in relation to which an election under section 18A of CTA 2009 has effect anything that would otherwise form part of the company's relevant liabilities or relevant assets does not do so if and to the extent that amounts in respect of it are left out of account under that section.]
(5)But an amount disclosed in the balance sheet of a company in respect of—
(a)the company's share capital, or
(b)shares or other equity interests in any other entity,
is not a “relevant liability” or a “relevant asset” for the purposes of this section.
(6)For the purposes of subsections (3) and (4) a return produced for a person by an arrangement in relation to any amount is “economically equivalent to interest” if (and only if)—
(a)it is reasonable to assume that it is a return by reference to the time value of that amount of money,
(b)it is at a rate reasonably comparable to what is (in all the circumstances) a commercial rate of interest, and
(c)at the relevant time there is no practical likelihood that it will cease to be produced in accordance with the arrangement unless the person by whom it falls to be produced is prevented (by reason of insolvency or otherwise) from producing it.
(7)In subsection (6)(c) “the relevant time” means the time when the company becomes party to the arrangement.
(8)For the purposes of subsections (3) and (4) an arrangement is “short term” if it terminates, or its terms provide for it to terminate, within 12 months of its coming into force.
(9)In this section the following expressions have the meaning for the time being given by generally accepted accounting practice—
“cash”,
“cash equivalent”,
“equity interest”,
“finance lease”,
“financial asset”,
“financial liability”,
“net cash investment”, in relation to a finance lease, and
“net investment”, in relation to a finance lease.]
Textual Amendments
F1S. 263(3)-(9) substituted for s. 263(3)-(5) (retrospectively) by Finance (No. 3) Act 2010 (c. 33), Sch. 5 paras. 4, 36(1) (with Sch. 5 para. 37)
F2S. 263(4A) inserted (19.7.2011) by Finance Act 2011 (c. 11), Sch. 13 paras. 29, 31