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(1)[F1A reference in this Chapter] to the “worldwide gross debt” of the worldwide group for a period of account of the group is to the average of—
(a)the sum of the relevant liabilities of the group as at the day before the first day of the period, and
(b)the sum of the relevant liabilities of the group as at the last day of the period.
(2)For the purposes of this section, the “relevant liabilities” of the worldwide group as at any date are the amounts that are disclosed in the balance sheet of the group as at that date in respect of—
[F2(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.]
[F3(3)But an amount disclosed in the balance sheet of the group in respect of the share capital of any member of the group is not a “relevant liability” for the purposes of this section.
(4)For the purposes of subsection (2) 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.
(5)In subsection (4)(c) “the relevant time” means the time when any member of the group becomes party to the arrangement.
(6)For the purposes of subsection (2) an arrangement is “short term” if it terminates, or its terms provide for it to terminate, within 12 months of its coming into force.
(7)In this section the following expressions have the meaning for the time being given by the accounting standards in accordance with which the financial statements of the group are drawn up—
“finance lease”, and
“financial liability”.
(8)For provision about references in this Part to financial statements of the worldwide group, and amounts disclosed in financial statements, see sections 346 to 349.]
Textual Amendments
F1Words in s. 264(1) substituted (retrospectively) by Finance (No. 3) Act 2010 (c. 33), Sch. 5 paras. 5(2), 36(1)
F2S. 264(2)(a)-(d) substituted for s. 264(a)-(c) (retrospectively) by Finance (No. 3) Act 2010 (c. 33), Sch. 5 paras. 5(3), 36(1) (with Sch. 5 para. 37)
F3S. 264(3)-(8) substituted for s. 264(3)(4) (retrospectively) by Finance (No. 3) Act 2010 (c. 33), Sch. 5 paras. 5(4), 36(1) (with Sch. 5 para. 37)
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