Taxation (International and Other Provisions) Act 2010 section 478

Treatment of business combinations

Section 478 explains how the corporate interest restriction rules apply where two entities combine their businesses by contract and are treated as a single economic entity under international accounting standards, even though each would otherwise head its own worldwide group.

• Where two entities would each normally be the ultimate parent of their own worldwide group, but are treated as a single economic entity under international accounting standards because of a business combination achieved by contract, special rules apply.
• The corporate interest restriction rules treat both entities as if they were consolidated subsidiaries of a notional parent entity (referred to as the "deemed parent").
• The deemed parent is treated as meeting the conditions for being the ultimate parent of a worldwide group, even though it does not actually exist.
• The term "business combination" takes its meaning from international accounting standards (such as IFRS 3).

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