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This guidance applies to worldwide group periods of account ending before or straddling 1 April 2017.

TIOPA10/S266 (2) requires that ‘substantially all� of the trading income must be derived from qualifying activities

It would be very unusual for a financial services group to have 100% of its trading income derived from qualifying activities; groups have diverse business operations and a condition based on 100% qualifying activity would have little practical impact. However, a balance is needed as the financial exclusion should only apply to groups whose business activities require debt as part of their operating models.

TIOPA10/S266 (2) refers to substantially all the trading income (either the worldwide trading income or UK trading income) being derived from qualifying activities. The expression ‘substantially all� is not defined in legislation. In practice HMRC will interpret the expression as meaning around 90%. A degree of flexibility can be applied; for example if a group consistently has more than 90% of its trading income being derived from qualifying activities, but finds in one year it is just below 90% then the group would be treated as meeting the ‘substantially all� test.