CFM96030 | Interest restriction: group-interest: QNGIE: related party debt

TIOPA10/S414(3)(a), S414(5), S415(1)-(3)

In determining the amount of interest and other financing costs that qualify to be included in qualifying net group-interest expense certain amounts are excluded. In particular, amounts are excluded where the loans or other financial liabilities owed to a related party.

Where the loan or other financial liability is owed to a related party for only part of the period of account, then only the amounts attributable to that part of the period will be restricted. This applies in particular where:

• A creditor becomes or ceases to be a related party during the period

• A related party acquires or disposes of a debt during the period.

Although, in general, a debt that subject to a guarantee, indemnity or other form of financial assistance from a related party will be a treated as related party debt, this is subject to a number of exclusions. So a debt will not be regarded as related party debt for the purposes of the group ratio method where the financial assistance is:

• existed before 1 April 2017,

• provided by another member of the group,

• simply pledges shares or loans in the group, or

• is a performance guarantee.