[F1 Part 10] U.K.[F1 Corporate interest restriction]

Textual Amendments

F1 Pt. 10: the existing Pt. 10 renumbered as Pt. 11 (except for ss. 375, 376 which are repealed), the existing ss. 372-374, 377-382 renumbered as ss. 499-507 and a new Pt. 10 (ss. 372-498) inserted (with effect in accordance with Sch. 5 para. 25(1)-(3) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 1, 10(1)(2)(a)(3) (with Sch. 5 paras. 27, 32-34)

Modifications etc. (not altering text)

C1 Pt. 10 excluded by 2010 c. 4, s. 937NA (as inserted (with effect in accordance with Sch. 5 para. 25(1)(2) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 7)

C2 Pt. 10 excluded by 2010 c. 4, s. 938V(d) (as substituted (with effect in accordance with Sch. 5 para. 25(1)(2) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 9)

C3 Pt. 10 excluded by 2010 c. 4, s. 938N(e) (as substituted (with effect in accordance with Sch. 5 para. 25(1)(2) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 8)

[F1 CHAPTER 4 U.K.Interest capacity

392 The interest capacity of a worldwide group for a period of account U.K.

(1) For the purposes of this Part “the interest capacity” of a worldwide group for a period of account of the group (“the current period”) is (subject to subsection (2))—

where—

A is the interest allowance of the group for the current period (see Chapter 5);

B is the aggregate of the interest allowances of the group for periods before the current period so far as they are available in the current period (see section 393).

(2) Where the amount determined under subsection (1) is less than the de minimis amount for the current period, the interest capacity of the worldwide group for the period is the de minimis amount.

(3) For this purpose “the de minimis amount” for a period of account is—

(a) £2 million, or

(b) where the period is more than or less than a year, the amount mentioned in paragraph (a) proportionately increased or reduced.

393 Amount of interest allowance for a period that is “available” in a later period U.K.

(1) This section applies for the purposes of this Chapter.

(2) The amount of the interest allowance of a worldwide group for a period of account (“the originating period”) that is “available” in a later period of account of the group (“the receiving period”) is (subject to subsection (5)) the lower of amounts A and B.

(3) Amount A is—

(a) the amount of the interest allowance for the originating period, less

(b) the total of the amount or amounts (if any) of that interest allowance that were used in the originating period, or in any subsequent period of account of the group before the receiving period (see section 394).

(4) Amount B is the amount (if any) of the interest allowance for the originating period that is unexpired in the receiving period (see section 395).

(5) The amount of the interest allowance for the originating period that is “available” in the receiving period is nil if—

(a) an abbreviated return election [F2 has effect] in relation to the originating period, the receiving period or any intervening period of account of the group, or

(b) an interest restriction return is not submitted for any such period.

Textual Amendments

F2 Words in s. 393(5)(a) substituted (retrospectively) by Finance Act 2018 (c. 3), Sch. 8 paras. 19, 23(1)

394 When interest allowance is “used” U.K.

(1) This section applies for the purposes of this Chapter.

(2) The amount of the interest allowance of a worldwide group for a period of account of the group (“the originating period”) that is “used” in the originating period is the lower of—

(a) the interest allowance for the originating period, and

(b) the sum of—

(i) the aggregate net tax-interest expense of the group for the originating period;

(ii) the total amount of tax-interest expense amounts required to be brought into account in the originating period under section 379 (reactivation of interest) by members of the group.

(3) The amount of the interest allowance for the originating period that is “used” in a later period of account of the group (“the receiving period”) is the lower of—

(a) the interest allowance so far as it is available in the receiving period (see section 393), and

(b) the relevant part of the aggregate net tax-interest expense of the group for the receiving period (see subsection (4)).

(4) In subsection (3)(b) “the relevant part of the aggregate net tax-interest expense of the group for the receiving period” is (subject to subsection (5))—

where—

A is the aggregate net tax-interest expense of the group for the receiving period;

B is the interest allowance of the group for the receiving period;

C is the amount of the interest allowance of the group for any period before the originating period that is used in the receiving period.

(5) Where the amount determined under subsection (4) is negative, “the relevant part of the aggregate net tax-interest expense of the group for the receiving period” is nil.

395 Amount of interest allowance for a period of account that is “unexpired” in later period U.K.

(1) This section contains provision for determining for the purposes of this Chapter the extent to which an interest allowance of a worldwide group for a period of account (“the originating period”) is “unexpired” in a later period of account of the group (“the receiving period”).

(2) If the receiving period—

(a) begins 5 years or less after the originating period begins, and

(b) ends 5 years or less after the originating period ends,

all of the interest allowance for the originating period is unexpired in the receiving period.

(3) If the receiving period begins 5 years or more after the originating period ends, none of the interest allowance for the originating period is unexpired in the receiving period.

(4) Subsection (5) applies if the receiving period—

(a) begins more than 5 years after the originating period begins, and

(b) ends 5 years or less after the originating period ends.

(5) The amount of the interest allowance for the originating period that is unexpired in the receiving period is—

where—

A is the interest allowance for the originating period;

B is—

(a)

the aggregate net tax-interest expense of the group for the originating period, or

(b)

if lower, the interest allowance for the originating period;

X is the number of days in the period—

(a)

beginning with the day on which the receiving period begins, and

(b)

ending with the day 5 years after the day on which the originating period ends;

Y is the number of days in the originating period.

(6) Subsection (7) applies if the receiving period—

(a) begins 5 years or less after the originating period begins, and

(b) ends more than 5 years after the originating period ends.

(7) The amount of the interest allowance for the originating period that is unexpired in the receiving period is—

where—

C is the aggregate net tax-interest expense of the group for the receiving period;

D is—

(a)

the interest allowance of the group for the receiving period, or

(b)

if lower, the aggregate net tax-interest expense of the group for the receiving period;

X has the same meaning as in subsection (5);

Z is the number of days in the receiving period.

(8) Subsection (9) applies if—

(a) the receiving period—

(i) begins more than 5 years after the originating period begins, and

(ii) ends more than 5 years after the originating period ends, and

(b) subsection (3) does not apply.

(9) The amount of the interest allowance for the originating period that is unexpired in the receiving period is the lower of the amounts determined under subsections (5) and (7).

[F3 395ACarry forward of interest allowance: new holding company U.K.

(1) This section applies if—

(a) a company (“C”) ceases to be the ultimate parent of a worldwide group (“the old group”) because of a qualifying takeover, and

(b) another company (“N”) becomes the ultimate parent of a worldwide group (“the new group”) as a result of the takeover.

(2) For this purpose there is a qualifying takeover if there is a change in the ownership of C which is disregarded for the purposes of Chapters 2 to 6 of Part 14 of CTA 2010 as a result of section 724A of that Act where—

(a) C is the other company referred to as C in that section, and

(b) N is the new company referred to as N in that section.

[F4 (3) For the purposes of this Chapter and Chapter 5—

(a) so far as it would not otherwise be the case—

(i) the first period of account of the new group is treated as beginning with the day on which the qualifying takeover occurs (the “takeover day”), and

(ii) the last period of account of the old group is treated as ending on the day before the takeover day;

(b) the interest allowance of the new group is determined as if periods of account of the old group which ended before the beginning of the first period of account of the new group were periods of account of the new group.]]]

Textual Amendments

F3 S. 395A inserted (with effect in accordance with Sch. 11 para. 23 of the amending Act) by Finance Act 2019 (c. 1), Sch. 11 para. 3

F4 S. 395A(3) substituted (with effect in accordance with Sch. 3 para. 30-36 of the amending Act) by Finance (No. 2) Act 2023 (c. 30), Sch. 3 para. 3