3(1)Section 262 (UK net debt of the worldwide group for period of account of worldwide group) is amended as follows.U.K.
(2)In subsection (1)—
(a)for “The reference in section 261” substitute “ A reference in this Chapter ”, and
(b)after “relevant group company” insert “ or a group securitisation company ”.
(3)In subsection (8), in paragraphs (a) and (b), after “relevant group company” insert “ or a group securitisation company ”.
4U.K.In section 263 (net debt of a company), for subsections (3) to (5) substitute—
“(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.
(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.”
5(1)Section 264 (worldwide gross debt) is amended as follows.U.K.
(2)In subsection (1), for “The reference in section 261” substitute “ A reference in this Chapter ”.
(3)In subsection (2), for paragraphs (a) to (c) substitute—
“(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 subsections (3) and (4) substitute—
“(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.”
6(1)Section 265 (references to amounts disclosed in balance sheet) is amended as follows.U.K.
(2)In the heading, for “relevant group” substitute “ a ”.
(3)In subsections (1) and (5), omit “relevant group”.
7U.K.After section 265 insert—
(1)This section applies where—
(a)for the purposes of the computation of the UK net debt of the worldwide group, the amount of a relevant liability of a company (“the company-level relevant liability”) is determined in accordance with section 263,
(b)for the purposes of the computation of the worldwide gross debt of the group, the amount of a relevant liability of the worldwide group (“the group-level relevant liability”) is determined in accordance with section 264,
(c)the company-level relevant liability is an amount in respect of the same matter as—
(i)the group-level relevant liability, or
(ii)a liability comprised in the group-level relevant liability, and
(d)the amount of the company-level relevant liability would not, apart from this section, be the same as the amount of the liability mentioned in paragraph (c)(i) or (ii).
(2)For the purposes of the computation mentioned in subsection (1)(a), the amount of the company-level relevant liability is the amount of the liability mentioned in subsection (1)(c)(i) or (ii).”
8U.K.In section 266(3) (qualifying financial services groups), in the definition of “UK trading income”, after “relevant group company” insert “ or a group securitisation company ”.
9U.K.In section 270 (relevant dealing in financial instruments), for subsection (1) substitute—
“(1)In this Chapter “financial instrument” means—
(a)anything that is a financial instrument for any purpose of the FSA handbook, or
(b)an instrument not within paragraph (a) that is an option, future or contract for differences.
(1A)In this section “option”, “future” and “contract for differences” have the same meaning as in Part 7 of CTA 2009 (see sections 580 to 582 of that Act).”
10(1)Section 271 (UK trading income of the worldwide group) is amended as follows.U.K.
(2)In subsections (2), (3), (4) and (6), omit “relevant group”.
(3)In subsection (7), for “relevant group company” substitute “ group securitisation company ”.
11U.K.In section 273 (foreign currency accounting), in subsections (1), (2) and (3)(a), omit “relevant group”.
12U.K.After section 273 insert—
For the purposes of this Chapter, a company is a “group securitisation company” at any time during a period of account of the worldwide group if—
(a)it is, at that time, a securitisation company within the meaning of section 83(2) of FA 2005 or section 623 of CTA 2010, and
(b)its results are disclosed in the financial statements of the worldwide group for the period.”