Taxation (International and Other Provisions) Act 2010 section 400A

Carry forward of excess debt cap: new holding company

Section 400A allows a new group's excess debt cap from the old group to be carried forward when a new holding company is inserted above the existing parent company in a qualifying reorganisation.

• When a new holding company (N) is inserted above an existing parent company (C) through a qualifying takeover, any unused excess debt cap from the old group can transfer to the new group.
• A qualifying takeover is one where the change in ownership of C is disregarded under section 724A of CTA 2010 — essentially a reorganisation that inserts a new top company without genuinely changing who owns the group.
• A key condition is that shareholders' proportional interests in the new ultimate parent must be identical, or as close to identical as possible, to their interests in the old ultimate parent.
• When calculating the new group's fixed ratio debt cap or group ratio debt cap for its first period of account, the excess debt cap from the old group's final period (ending the day before the takeover) is treated as if it were the new group's own excess debt cap from the immediately preceding period.