Taxation (International and Other Provisions) Act 2010 (c. 8)

[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F1 Pt. 10: the existing Pt. 10 renumbered as Pt. 11 (except for ss. 375, 376 which are repealed), the existing ss. 372-374, 377-382 renumbered as ss. 499-507 and a new Pt. 10 (ss. 372-498) inserted (with effect in accordance with Sch. 5 para. 25(1)-(3) of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 7 U.K. Group-interest and group-EBITDA

Group-EBITDA U.K.

416 Group-EBITDA U.K.

(1) For the purposes of this Part “the group-EBITDA” of a worldwide group for a period of account of the group (“the relevant period of account”) is—

where—

PBT is the group's profit before tax (which may be a negative amount) (see subsection (2));

I is the net group-interest expense of the group for the period (which may be a negative amount) (see section 410);

DA is the group's depreciation and amortisation adjustment (which may be a negative amount) (see subsection (3)).

(2) For the purposes of this Chapter a worldwide group's “profit before tax” is—

(a) the sum of the amounts that are recognised in the financial statements of the group for the period, as items of profit or loss, in respect of income of any description other than tax income, less

(b) the sum of the amounts that are recognised in the financial statements of the group for the period, as items of profit or loss, in respect of expenses of any description other than tax expense.

In this subsection “tax income” and “tax expense” have the meaning they have for accounting purposes.

[F2 (2A) An amount is not to be taken into account in calculating a worldwide group's profit before tax for the purposes of subsection (2) if it is, or relates to, an R&D expenditure credit [F3 under Chapter 1A of Part 13] of CTA 2009.]

(3) In this section the group's “depreciation and amortisation adjustment” means the sum of the following amounts (any of which may be negative)—

(a) the capital (expenditure) adjustment (see section 417);

(b) the capital (fair value movement) adjustment (see section 418);

(c) the capital (disposals) adjustment (see section 419).

(4) The following expressions have the same meaning in sections 417 to 419 as they have in this section—

• “the relevant period of account”;

• “the group's profit before tax”.

(5) For provision affecting amounts recognised in financial statements in respect of certain profits or losses arising from derivative contracts, see section 420.

Textual Amendments

F2 S. 416(2A) inserted (retrospectively) by Finance Act 2018 (c. 3), Sch. 8 paras. 6, 23(1)

F3 Words in s. 416(2A) substituted (with effect in relation to accounting periods beginning on or after 1.4.2024) by Finance Act 2024 (c. 3), Sch. 1 paras. 14(4)(b), 16; S.I. 2024/286, reg. 2

417 The capital (expenditure) adjustment U.K.

(1) For the purposes of section 416, “the capital (expenditure) adjustment” is—

where—

A is the sum of the amounts (if any) in respect of relevant capital expenditure which are brought into account in determining the group's profit before tax;

B is the sum of the amounts (if any) in respect of relevant capital expenditure reversals which are brought into account in determining the group's profit before tax;

C is the sum of the amounts (if any) in respect of relevant capital income which are brought into account in determining the group's profit before tax.

(2) In this section “relevant capital expenditure” means—

(a) expenditure of a capital nature that relates to relevant assets (including any relevant expense amounts previously included in the carrying value of relevant assets) that is recognised in the relevant period of account by way of depreciation or amortisation, or as the result of an impairment review,

(b) expenditure of a capital nature that relates to relevant assets that is incurred and recognised in the relevant period of account, and

(c) amounts recognised in the relevant period of account by way of provision in respect of future expenditure of a capital nature that relates to relevant assets.

(3) In this section “relevant capital expenditure reversals” means the reversal in the relevant period of account of any relevant capital expenditure recognised in an earlier period of account.

(4) In this section “relevant capital income” means income of a capital nature that relates to relevant assets.

(5) In this Chapter “relevant asset” means an asset that is—

(a) plant, property and equipment,

(b) an investment property,

(c) an intangible asset,

(d) goodwill,

(e) shares in a company, or

(f) an interest in an entity which entitles the holder to a share of the profits of the entity.

(6) In subsection (5)—

(a) “plant, property and equipment” has the meaning it has for accounting purposes;

(b) “investment property” has the meaning it has for accounting purposes;

(c) “intangible asset” has the meaning it has for accounting purposes (and includes an internally-generated intangible asset);

(d) “goodwill” has the meaning it has for accounting purposes (and includes internally-generated goodwill);

(e) “entity” includes anything which is treated as an entity in the financial statements of the group (regardless of whether it has a legal personality as a body corporate).

Section 712(2) and (3) of CTA 2009 (“intangible asset” includes intellectual property) applies for the purposes of paragraph (c).

(7) An amount does not fall within A in subsection (1) if it is brought into account in determining a profit or loss on the disposal of a relevant asset.

418 The capital (fair value movement) adjustment U.K.

(1) In section 416, “the capital (fair value movement) adjustment” means the sum of any relevant fair value movements.

(2) For the purposes of subsection (1) there is a “relevant fair value movement” where—

(a) the carrying value of a relevant asset is measured, for the purposes of the financial statements of the group, using fair value accounting, and

(b) an amount representing a change in the carrying value of the asset is brought into account in determining the group's profit before tax.

(3) The amount of the relevant fair value movement is the amount of the change mentioned in subsection (2)(b) and—

(a) is a positive amount where the change is a loss;

(b) is a negative amount where the change is a profit.

(4) References in this section to a change in the carrying value of a relevant asset do not include a change where the amount brought into account in respect of the change as mentioned in subsection (2)(b) is of a revenue nature.

419 The capital (disposals) adjustment U.K.

(1) For the purposes of section 416, “the capital (disposals) adjustment” is—

where—

A is the sum of the amounts (if any) that are brought into account in determining the group's profit before tax and that represent losses on disposals of relevant assets;

B is the sum of the amounts (if any) that are brought into account in determining the group's profit before tax and that represent profits on disposals of relevant assets;

C is the sum of any recalculated profit amounts (see subsections (2) to (8)).

(2) For the purposes of the definition of C in subsection (1) there is a “recalculated profit amount” where the following two conditions are met.

(3) The first condition is that an amount is brought into account in determining the group's profit before tax in respect of a profit or loss on the disposal of a relevant asset.

(4) The second condition is that—

(a) the relevant proceeds, exceeds

(b) the relevant cost.

(5) The amount of the recalculated profit amount is the amount of the excess mentioned in subsection (4).

(6) In this section “the relevant proceeds” means the amount of income of a capital nature that is brought into account in determining the profit or loss mentioned in subsection (3).

(7) In this section “the relevant cost” means (subject to subsection (8)) the amount of expenditure of a capital nature that is brought into account in determining the profit or loss mentioned in subsection (3).

(8) For the purposes of subsection (7), any adjustment made to the amount brought into account as mentioned in that subsection is to be disregarded where the adjustment is in respect of amounts that—

(a) are otherwise recognised, in the financial statements of the group for the relevant period of account, as items of profit or loss, or

(b) were so recognised in the financial statements of the group for an earlier period.

(9) References in this section to a relevant asset include part of a relevant asset.

(10) References in this section to the disposal of a relevant asset do not include a disposal where the profit or loss (if any) on the disposal is of a revenue nature.

(11) The condition in subsection (3) is met even if no amount is brought into account as mentioned in that subsection if that is because no gain or loss accrued on the disposal; and subsections (6) to (8) apply accordingly.]