Taxation (International and Other Provisions) Act 2010

[F1 PART 2 U.K. Contents of interest restriction return

Textual Amendments

F1 Sch. 7A 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. 2 (with Sch. 5 para. 28)

Elections U.K.

12 (1) An election to which this paragraph applies must be made in an interest restriction return for the period of account (or, as the case may be, the first period of account) to which the election relates. U.K.

(2) If an election to which this paragraph applies is capable of being revoked, the revocation must be made in an interest restriction return for the period of account (or, as the case may be, the first period of account) to which the revocation relates.

(3) This paragraph applies to the following elections—

(a) a group ratio election (see paragraph 13);

(b) a group ratio (blended) election (see paragraph 14);

(c) a group-EBITDA (chargeable gains) election (see paragraph 15);

(d) an interest allowance (alternative calculation) election (see paragraph 16);

(e) an interest allowance (non-consolidated investment) election (see paragraph 17);

(f) an interest allowance (consolidated partnerships) election (see paragraph 18);

(g) an abbreviated return election (see paragraph 19).

Modifications etc. (not altering text)

C1 Sch. 7A para. 12(2) applied (15.3.2018) by Finance Act 2018 (c. 3), Sch. 8 para. 23(3)

Group ratio election U.K.

13 (1) This paragraph applies where the appointment of a reporting company has effect in relation to a period of account of a worldwide group. U.K.

(2) The reporting company may—

(a) elect that the interest allowance of the group is to be calculated using the group ratio method, or

(b) revoke an election previously made.

(3) An election or revocation under this paragraph has effect in relation to the period of account.

(4) An election under this paragraph is referred to in this Part of this Act as a “group ratio election”.

(5) For provision as to the effect of a group ratio election, see section 396.

Group ratio (blended) election U.K.

14 (1) This paragraph applies where— U.K.

(a) the appointment of a reporting company has effect in relation to a period of account of a worldwide group,

(b) the reporting company makes a group ratio election in respect of the period of account, and

(c) a related party investor in relation to the period of account is, throughout the period of account, a member of a worldwide group (an “investor worldwide group”) other than that mentioned in paragraph (a).

(2) The reporting company may—

(a) elect that Chapter 5 of Part 10 (interest allowance) is to apply subject to the blended group ratio provisions, or

(b) revoke an election previously made.

(3) An election under this paragraph may—

(a) specify one or more investor worldwide groups,

(b) specify, in relation to any such group, one or more elections under this Schedule that are capable of being made in relation to a period of account by a reporting company of a worldwide group, and

(c) specify that the election is to be treated, for the purposes of the blended group ratio provisions, as having effect, or as not having effect, in relation to periods of account of the investor's worldwide group.

(4) Sub-paragraph (5) applies where—

(a) an election under this paragraph is made in relation to a period of account,

(b) an election under this paragraph was made in relation to any earlier period of account of the group,

(c) the election mentioned in paragraph (b) specified, under sub-paragraph (3)(c), that an election (“the investor's election”) was to be treated as having effect in relation to periods of account of the investor's worldwide group, and

(d) the investor's election was an election which, if made by a reporting company of a worldwide group, would have been irrevocable.

(5) The election mentioned in sub-paragraph (4)(a) must specify, under sub-paragraph (3)(c), that the investor's election is to be treated as having effect in relation to periods of account of the investor's worldwide group.

(6) An election or revocation under this paragraph has effect in relation to the period of account.

(7) An election under this paragraph is referred to in this Part of this Act as a “group ratio (blended) election”.

(8) In this paragraph “the blended group ratio provisions” means the provisions of sections 401 to 403.

Group-EBITDA (chargeable gains) election U.K.

15 (1) This paragraph applies where the appointment of a reporting company has effect in relation to a period of account of a worldwide group. U.K.

(2) The reporting company may elect that Chapter 7 of Part 10 (group-interest and group-EBITDA) is to apply subject to the chargeable gains provisions.

(3) An election under this paragraph—

(a) has effect in relation to the period of account and subsequent periods of account of the worldwide group, and

(b) is irrevocable.

(4) An election under this paragraph is referred to in this Part of this Act as a “group-EBITDA (chargeable gains) election”.

(5) In this paragraph “the chargeable gains provisions” means the provisions of section 422.

Interest allowance (alternative calculation) election U.K.

16 (1) This paragraph applies where the appointment of a reporting company has effect in relation to a period of account of a worldwide group. U.K.

(2) The reporting company may elect that Chapter 7 of Part 10 (group-interest and group-EBITDA) is to apply subject to the alternative calculation provisions.

(3) An election under this paragraph—

(a) has effect in relation to the period of account and subsequent periods of account of the worldwide group, and

(b) is irrevocable.

(4) An election under this paragraph is referred to in this Part of this Act as an “interest allowance (alternative calculation) election”.

(5) In this paragraph “the alternative calculation provisions” means sections 423 to 426.

Interest allowance (non-consolidated investment) election U.K.

17 (1) This paragraph applies where the appointment of a reporting company has effect in relation to a period of account of a worldwide group. U.K.

(2) The reporting company may—

(a) elect that Chapter 7 of Part 10 (group-interest and group-EBITDA) is to apply subject to the non-consolidated investment provisions, or

(b) revoke an election previously made.

(3) An election under this paragraph must specify, for the purposes of the non-consolidated investment provisions, one or more non-consolidated associates of the worldwide group.

(4) An election or revocation under this paragraph has effect in relation to the period of account.

(5) An election under this paragraph is referred to in this Part of this Act as an “interest allowance (non-consolidated investment) election”.

(6) In this paragraph “the non-consolidated investment provisions” means sections 427 and 428.

Interest allowance (consolidated partnerships) election U.K.

18 (1) This paragraph applies where the appointment of a reporting company has effect in relation to a period of account of a worldwide group. U.K.

(2) The reporting company may elect that Chapter 7 of Part 10 (group-interest and group-EBITDA) is to apply subject to the consolidated partnership provisions.

(3) An election under this paragraph must specify, for the purposes of the consolidated partnership provisions, one or more consolidated partnerships of the worldwide group.

(4) Where an election under this paragraph has been made in relation to a worldwide group, a further election may be made specifying, for the purposes of the consolidated partnership provisions, one or more additional consolidated partnerships of the worldwide group.

(5) An election under this paragraph—

(a) has effect in relation to the period of account and subsequent periods of account of the worldwide group, and

(b) is irrevocable.

(6) An election under this paragraph is referred to in this Part of this Act as an “interest allowance (consolidated partnerships) election”.

(7) In this paragraph “the consolidated partnership provisions” means the provisions of section 430.

Abbreviated return election U.K.

19 (1) This paragraph applies where the appointment of a reporting company has effect in relation to a period of account of a worldwide group. U.K.

(2) The reporting company may—

(a) elect to submit an abbreviated interest restriction return, or

(b) revoke an election previously made.

(3) An election or revocation under this paragraph has effect in relation to the period of account.

(4) An election under this paragraph is referred to in this Part of this Act as an “abbreviated return election”.

(5) For provision as to the effect of an abbreviated return election, see—

• paragraph 20 of this Schedule (which limits the required contents of the interest restriction return);

• section 393 (which deprives the group of the use of the interest allowance for the return period, or any earlier period, in future periods of account).

Required contents of interest restriction return: full returns and abbreviated returns U.K.

20 (1) This paragraph makes provision about the contents of an interest restriction return submitted by the reporting company of a worldwide group. U.K.

(2) Sub-paragraph (3) applies if—

(a) the worldwide group is subject to interest restrictions in the return period, or

(b) the worldwide group is not subject to interest restrictions in the return period, and no abbreviated return election has effect in relation to the period.

(3) The interest restriction return must—

(a) state the name and (where it has one) the Unique Taxpayer Reference of the ultimate parent of the worldwide group;

(b) specify the return period;

(c) state the names and Unique Taxpayer References (where they have them) of the companies that were UK group companies at any time during the return period, specifying in relation to each whether it is a consenting or a non-consenting company in relation to the return;

(d) contain a statement of calculations (see paragraph 21);

(e) if the group is subject to interest restrictions in the return period—

(i) contain a statement of that fact,

(ii) specify the total disallowed amount, and

(iii) contain a statement of allocated interest restrictions (see paragraph 22);

(f) if the group is subject to interest reactivations in the return period—

(i) contain a statement of that fact,

(ii) specify the interest reactivation cap,

(iii) contain a statement of allocated interest reactivations (see paragraph 25);

(g) contain a declaration by the person making the return that the return is, to the best of that person's knowledge, correct and complete.

(4) Sub-paragraph (5) applies if—

(a) the worldwide group is not subject to interest restrictions in the return period, and

(b) an abbreviated return election has effect in relation to the period.

(5) The interest restriction return must—

(a) state that the group is not subject to interest restrictions in the return period, and

(b) comply with paragraphs (a) to (c) and (g) of sub-paragraph (3).

[F2 (5A) In addition to the matters required to be included in an interest restriction return in accordance with sub-paragraph (3) or (5), the return must include such other specified information as may reasonably be required for the purposes of this Part of this Act.

(5B) In sub-paragraph (5A) “specified” means specified in a notice published by Her Majesty’s Revenue and Customs (and different information may be specified for different purposes).]

(6) If the ultimate parent of the worldwide group is a deemed parent by virtue of section 477 (stapled entities) or 478 (business combinations), the requirement in sub-paragraph (3)(a) is to state the name and (where it has one) Unique Taxpayer Reference of each of the entities mentioned in that paragraph.

(7) In this Part of this Act—

(a) a return prepared in accordance with sub-paragraph (3) is referred to as “a full interest restriction return”;

(b) a return prepared in accordance with sub-paragraph (5) is referred to as “an abbreviated interest restriction return”.

Textual Amendments

F2 Sch. 7A para. 20(5A)(5B) inserted (with effect in accordance with Sch. 11 para. 26 of the amending Act) by Finance Act 2019 (c. 1), Sch. 11 para. 18

Statement of calculations U.K.

21 U.K. The statement of calculations required by paragraph 20(3)(d) to be included in a full interest restriction return must include the following information—

(a) for each company that was a UK group company at any time during the return period—

(i) the company's net tax-interest expense, or net tax-interest income, for the return period (see section 389);

(ii) the company's tax-EBITDA for the return period (see section 406);

(b) the aggregate net tax-interest expense, and aggregate net tax-interest income, of the group for the return period (see section 390);

(c) the interest capacity of the group for the return period (see section 392);

(d) the aggregate of interest allowances of the group for periods before the return period so far as they are available in the return period (see section 393);

(e) the interest allowance of the group for the return period (see section 396);

(f) the aggregate tax-EBITDA of the group for the return period (see section 405);

(g) where the interest allowance is calculated using the fixed ratio method and that allowance is given by section 397(1)(b), the adjusted net group-interest expense of the group for the return period (see section 413);

(h) where the interest allowance is calculated using the group ratio method—

(i) the group ratio percentage (see section 399 or 401);

(ii) the qualifying net group-interest expense of the group for the return period (see section 414);

(iii) the group-EBITDA of the group for the return period (see section 416).

Statement of allocated interest restrictions U.K.

22 (1) The statement of allocated interest restrictions required by paragraph 20(3)(e) to be included in a full interest restriction return must— U.K.

(a) list one or more companies that—

(i) were UK group companies at any time during the return period, and

(ii) had net tax-interest expense for the period,

(b) in relation to each company listed under paragraph (a), specify an amount, and

(c) show the total of the amounts specified under paragraph (b).

(2) The amount specified under sub-paragraph (1)(b) in relation to a company is referred to in this Part of this Act as the “allocated disallowance” of the company for the return period.

(3) The allocated disallowance of a company for the return period—

(a) must not exceed the net tax-interest expense of the company for the return period,

(b) where the company is a non-consenting company in relation to the return, must not exceed the company's pro-rata share of the total disallowed amount (see paragraph 23), and

(c) must not be a negative amount.

(4) The sum of the allocated disallowances for the return period of the companies listed in the statement must equal the total disallowed amount.

(5) The statement must also specify an amount in relation to each relevant accounting period of each company listed in the statement.

(6) The amount specified under sub-paragraph (5) in relation to an accounting period of a company is referred to in this Part of this Act as the “allocated disallowance” of the company for the accounting period.

(7) In the case of a company that has only one relevant accounting period, the allocated disallowance of the company for that accounting period must be equal to the allocated disallowance of the company for the return period.

(8) In the case of a company that has more than one relevant accounting period, the allocated disallowance of the company for any of those accounting periods—

(a) must not exceed so much of the net tax-interest expense of the company for the return period as is referable to the accounting period,

(b) where the company is a non-consenting company in relation to the return, must not exceed the accounting period's pro-rata share of the total disallowed amount (see paragraph 24), and

(c) must not be a negative amount.

(9) The sum of the allocated disallowances of the company for its relevant accounting periods must be equal to the allocated disallowance of the company for the return period.

A company's pro-rata share of the total disallowed amount U.K.

23 (1) This paragraph— U.K.

(a) applies in relation to a worldwide group that is subject to interest restrictions in a period of account of the group, and

(b) allocates the total disallowed amount of the group in the period to companies that are UK group companies at any time during the period.

(2) The amount allocated to a company under this paragraph is referred to in this Part of this Act as the company's “pro-rata share” of the total disallowed amount.

(3) Sub-paragraph (4) applies in relation to a company that has net tax-interest expense for the period of account.

(4) The amount of the total disallowed amount that is allocated to the company is—

where—

A is the total disallowed amount;

B is the net tax-interest expense of the company for the period of account;

C is the sum of the net tax-interest expense for the period of account of each company that has net tax-interest expense for the period.

(5) Where this paragraph does not allocate any of the total disallowed amount to a company, the company's “pro-rata share” of the total disallowed amount is nil.

Accounting period's pro-rata share of the total disallowed amount U.K.

24 (1) This paragraph— U.K.

(a) applies in relation to a worldwide group that is subject to interest restrictions in a period of account of the group (“the relevant period of account”), and

(b) allocates the total disallowed amount of the group in the period of account to relevant accounting periods of companies that are UK group companies at any time during that period.

(2) The amount allocated to an accounting period under this paragraph is referred to in this Part of this Act as the accounting period's “pro-rata share” of the total disallowed amount.

(3) Sub-paragraph (4) applies where—

(a) a company's pro-rata share of the total disallowed amount is not nil, and

(b) the company has only one relevant accounting period.

(4) The amount of the total disallowed amount that is allocated to the accounting period is the company's pro-rata share of the total disallowed amount.

(5) Sub-paragraph (6) applies where—

(a) a company's pro-rata share of the total disallowed amount is not nil, and

(b) the company has more than one relevant accounting period.

(6) The amount of the total disallowed amount that is allocated to a relevant accounting period of the company is—

where—

A is the company's pro-rata share of the total disallowed amount;

B is the net tax-interest expense of the company for the accounting period;

C is the sum of the net tax-interest expenses of the company for each relevant accounting period.

(7) Where this paragraph does not allocate any of the total disallowed amount to an accounting period of a company, the accounting period's “pro-rata share” of the total disallowed amount is nil.

(8) For the purposes of this paragraph, the “net tax-interest expense” of a company for a relevant accounting period is—

(a) so much of the net tax-interest expense of the company for the relevant period of account as is referable to the accounting period, or

(b) if the amount determined under paragraph (a) is negative, nil.

Statement of allocated interest reactivations U.K.

25 (1) The statement of allocated interest reactivations required by paragraph 20(3)(f) to be included in a full interest restriction return must— U.K.

(a) list one or more companies that are UK group companies at any time during the return period,

(b) in relation to each company listed under paragraph (a), specify an amount, and

(c) show the total of the amounts specified under paragraph (b).

(2) The amount specified under sub-paragraph (1)(b) in relation to a company is referred to in this Part of this Act as the “allocated reactivation” of the company for the return period.

(3) The allocated reactivation of a company for the return period—

(a) must not exceed the amount available for reactivation of the company in the return period (see paragraph 26), and

(b) must not be a negative amount.

(4) The sum of the allocated reactivations for the return period of the companies listed in the statement must equal—

(a) the sum of the amounts available for reactivation of each company in the return period, or

(b) if lower, the interest reactivation cap of the worldwide group in the return period.

“Amount available for reactivation” of company in period of account of group U.K.

26 (1) This paragraph applies for the purposes of this Part of this Act. U.K.

(2) The “amount available for reactivation” of a company in a period of account of a worldwide group (“the relevant worldwide group”) is—

(a) the amount determined under sub-paragraph (3), or

(b) if lower, the company's interest reactivation cap (see sub-paragraph (5)).

(3) The amount referred to in sub-paragraph (2)(a) is—

where—

A is the total of the disallowed tax-interest expense amounts (if any) that are brought forward to the specified accounting period from earlier accounting periods;

B is the total of the tax-interest expense amounts (if any) that the company is required to leave out of account in the specified accounting period as a result of the operation of this Part of this Act in relation to a period of account of the worldwide group before the period of account;

C is the total of the disallowed tax-interest expense amounts (if any) that the company is required to bring into account in the specified accounting period as a result of the operation of this Part of this Act in relation to a period of account of the worldwide group before the period of account;

D is the total of the tax-interest expense amounts (if any) that the company is required to leave out of account in the specified accounting period as a result of the operation of this Part of this Act in relation to a period of account of a worldwide group of which the company was a member before it became a member of the relevant worldwide group;

E is the total of the disallowed tax-interest expense amounts (if any) that the company is required to bring into account in the specified accounting period as a result of the operation of this Part of this Act in relation to a period of account of a worldwide group of which the company was a member before it became a member of the relevant worldwide group.

(4) In sub-paragraph (3) “the specified accounting period” means—

(a) the earliest relevant accounting period of the company, or

(b) where the company became a member of the relevant worldwide group during the period of account, the earliest relevant accounting period of the company in which it was a member of the group.

(5) For the purposes of sub-paragraph (2)(b) “the interest reactivation cap” of the company is—

where—

A is the interest reactivation cap of the worldwide group in the period of account;

B is the proportion of the period of account in which the company is a UK group company.

Estimated information in statements U.K.

27 (1) This paragraph applies in relation to a statement under— U.K.

(a) paragraph 21 (statement of calculations),

(b) paragraph 22 (statement of allocated interest restrictions), or

(c) paragraph 25 (statement of allocated interest reactivations).

(2) Where any information is included in the statement that is (or is derived from) estimated information, the statement—

(a) must state that fact, and

(b) must identify the information in question.

(3) Where—

(a) estimated information (or information deriving from estimated information) is included in an interest restriction return for a period of account in reliance on this paragraph, and

(b) a period of 36 months beginning with the end of that period of account has passed without the information becoming final,

the reporting company must give a notice to an officer of Revenue and Customs within the period of 30 days beginning with the end of that 36-month period.

(4) The notice—

(a) must identify the information in question that is not final, and

(b) must indicate when the reporting company expects the information to become final.

(5) If a company fails to comply with the duty under sub-paragraph (3), it is liable to a penalty of £500.

(6) An officer of Revenue and Customs may, in a particular case, treat a revised interest restriction submitted after the end of the applicable period under paragraph 8(3)(a) or (b) as having effect if—

(a) the revisions to the return are limited to those necessary to take account of information that has become final,

(b) the officer considers that it was not possible to make those revisions before the end of that period, and

(c) the reporting company has complied with the duty under sub-paragraph (3).

Correction of return by officer of Revenue and Customs U.K.

28 (1) An officer of Revenue and Customs may amend an interest restriction return submitted by a company so as to correct— U.K.

(a) obvious errors or omissions in the return (whether errors of principle, arithmetical mistakes or otherwise), and

(b) anything else in the return that the officer has reason to believe is incorrect in the light of information available to the officer.

(2) A correction under this paragraph is made by notice to the company.

(3) A correction under this paragraph must not be made more than 9 months after the day on which the return was submitted.

(4) A correction under this paragraph is of no effect if the company—

(a) revises the return so as to reject the correction, or

(b) after the end of the period mentioned in paragraph 8(3)(a) or (b) but within 3 months from the date of the issue of the notice of correction, gives notice rejecting the correction.

(5) Notice under sub-paragraph (4)(b) must be given to the officer of Revenue and Customs by whom notice of the correction was given.

Penalty for failure to deliver return U.K.

29 (1) A company is liable to a penalty if the company— U.K.

(a) is required to submit an interest restriction return under paragraph 7 [F3 , or a revised interest restriction return under paragraph 8(4),] for a period of account of a worldwide group, and

(b) fails to do so by the filing date in relation to the period F4 ....

[F5 (1A) In subsection (1)(b), the reference to the “filing date” in relation to a period of account is—

(a) in relation to an interest restriction return under paragraph 7, a reference to the filing date for the purposes of that paragraph (see paragraph 7(5) and (5A));

(b) in relation to a revised interest restriction return under paragraph 8(4), a reference to the end of the period within which the return may have effect (see paragraph 8(5)).]

(2) The penalty is—

(a) £500 if the return is delivered within 3 months after the filing date, and

(b) £1,000 in any other case.

(3) If a company becomes liable to a penalty under this paragraph, an officer of Revenue and Customs must—

(a) assess the penalty, and

(b) notify the company.

(4) The assessment must be made within the period of 12 months beginning with the filing date mentioned in sub-paragraph (1)(b).

(5) A company may, by notice, appeal against a decision of an officer of Revenue and Customs that a penalty is payable under this paragraph.

(6) Notice of appeal under this paragraph must be given—

(a) within 30 days after the penalty was notified to the company,

(b) to the officer of Revenue and Customs who notified the company.

(7) A penalty under this paragraph must be paid before the end of the period of 30 days beginning with—

(a) the day on which the company was notified of the penalty, or

(b) if notice of appeal against the penalty is given, the day on which the appeal is finally determined or withdrawn.

Textual Amendments

F3 Words in Sch. 7A para. 29(1)(a) inserted (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. 22(2)(a)

F4 Words in Sch. 7A para. 29(1)(b) omitted (with effect in accordance with Sch. 3 para. 30-36 of the amending Act) by virtue of Finance (No. 2) Act 2023 (c. 30), Sch. 3 para. 22(2)(b)

F5 Sch. 7A para. 29(1A) inserted (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. 22(3)

[F6 29A (1) Liability to a penalty under paragraph 29 does not arise if the company has a reasonable excuse for failing to submit the return by the filing date. U.K.

(2) If the company has a reasonable excuse for the failure but the excuse has ceased, the company is to be treated as having continued to have the excuse if the return is submitted without unreasonable delay after the excuse ceased.]

Textual Amendments

F6 Sch. 7A para. 29A inserted (retrospectively) by Finance Act 2021 (c. 26), s. 38(4)(5)

Penalty for incorrect or uncorrected return U.K.

30 (1) A company is liable to a penalty if— U.K.

(a) the company (or a person acting on its behalf) submits an interest restriction return to an officer of Revenue and Customs for a period of account of a worldwide group,

(b) there is an inaccuracy in the return which meets condition A or B, and

(c) the inaccuracy is due to a failure by the company (or a person acting on its behalf) to take reasonable care (a “careless inaccuracy”) or the company makes the inaccuracy deliberately (a “deliberate inaccuracy”).

(2) An inaccuracy meets condition A if it consists of understating the total disallowed amount in the period of account of the group (including a case where no amount is specified in the return).

(3) An inaccuracy meets condition B if it consists of overstating the interest reactivation cap in the period of account of the group.

(4) A penalty payable under this paragraph is equal to the appropriate part of the notional tax.

(5) For the purposes of this Part of this Schedule—

• “the appropriate part” means—

  (a)

  in the case of a careless inaccuracy, 30%,

  (b)

  in the case of a deliberate inaccuracy that is not concealed, 70%, and

  (c)

  in the case of a deliberate inaccuracy that is concealed, 100%, and

• “the notional tax” means the result produced by applying the average rate of the main corporation tax rate applicable in each of the days of the period of account to the total of the amount of the understatement referred to in condition A and the amount of the overstatement referred to in condition B.

(6) A company is not liable to a penalty under this paragraph in respect of anything done or omitted to be done by the company's agent if the company took reasonable care to avoid the inaccuracy.

Meaning of “deliberate inaccuracy that is concealed” and discovering inaccuracy after return submitted U.K.

31 (1) For the purposes of this Part of this Schedule a deliberate inaccuracy made by a company is concealed if the company makes arrangements to conceal it (for example, by submitting false evidence in support of an inaccurate figure). U.K.

(2) An inaccuracy in an interest restriction return which was not a careless or deliberate inaccuracy made by a company (or a person acting on its behalf) when the return was submitted is taken to be a careless inaccuracy made by the company for the purposes of this Part of this Schedule if the company (or a person acting on its behalf)—

(a) discovers the inaccuracy at some later time, and

(b) does not take reasonable steps to inform an officer of Revenue and Customs.

Inaccuracy in return attributable to another company U.K.

32 (1) A company (“C”) is liable to a penalty if— U.K.

(a) another company submits an interest restriction return for a period of account of a worldwide group,

(b) there is an inaccuracy in the return which meets condition A or B in paragraph 30, and

(c) the inaccuracy was attributable to C deliberately supplying false information to the other company, or to C deliberately withholding information from the other company, with the intention of the return containing the inaccuracy.

(2) A penalty is payable under this paragraph in respect of an inaccuracy whether or not the other company is liable to a penalty under paragraph 30 in respect of the same inaccuracy.

(3) A penalty payable under this paragraph is equal to the notional tax.

Reductions in amount of penalty for disclosure or special circumstances U.K.

33 (1) If a company liable to a penalty under paragraph 30 or 32 in respect of an inaccuracy discloses the inaccuracy— U.K.

(a) the penalty must be reduced to one that reflects the quality of the disclosure (including its timing, nature and extent), but

(b) the penalty may not be reduced below the applicable minimum.

(2) In the case of a penalty under paragraph 30, the applicable minimum is—

(a) in the case of a careless inaccuracy, 0% of the notional tax if the disclosure is unprompted and 15% otherwise,

(b) in the case of a deliberate inaccuracy that is not concealed, 30% of the notional tax if the disclosure is unprompted and 45% otherwise, and

(c) in the case of a deliberate inaccuracy that is concealed, 40% of the notional tax if the disclosure is unprompted and 60% otherwise.

(3) In the case of a penalty under paragraph 32, the applicable minimum is 40% of the notional tax if the disclosure is unprompted and 60% otherwise.

(4) For the purposes of this paragraph—

(a) a person makes a disclosure of an inaccuracy by telling an officer of Revenue and Customs about it, giving an officer of Revenue and Customs reasonable help in quantifying it and allowing an officer of Revenue and Customs access to records to ensure that it is fully corrected, and

(b) a person makes an “unprompted” disclosure at any time if the person has no reason at that time to believe that an officer of Revenue and Customs have discovered, or are about to discover, the inaccuracy.

(5) If they think it right because of special circumstances, an officer of Revenue and Customs may—

(a) reduce a penalty under paragraph 30 or 32, or

(b) stay the penalty or agree a compromise in relation to proceedings for the penalty.

(6) The reference to special circumstances does not include an ability to pay but, subject to that, is taken to include, or exclude, such other circumstances as are prescribed by regulations made by the Commissioners.

(7) The power to prescribe circumstances includes power to prescribe circumstances by reference to the notional tax and the extent to which the notional tax exceeds, or is likely to exceed, any actual loss of tax to the Crown.

Assessment, payment and enforcement of penalty U.K.

34 (1) If a person becomes liable to a penalty under paragraph 30 or 32, an officer of Revenue and Customs must— U.K.

(a) assess the penalty, and

(b) notify the person.

(2) The assessment must be made within the period of 12 months beginning with the day on which the inaccuracy is corrected.

(3) The penalty must be paid before the end of the period of 30 days beginning with—

(a) the day on which the person was notified of the penalty, or

(b) if notice of appeal against the penalty is given, the day on which the appeal is finally determined or withdrawn.

(4) An assessment may be enforced—

(a) as if it were an assessment to corporation tax (which, among other things, secures the application of Chapters 6 and 7 of Part 22 of CTA 2010 (corporation tax payable by non-UK resident companies: recovery from others)), and

(b) as if that assessment were also an assessment to corporation tax of any company which was a UK group company of the group at any time in the period of account in relation to which the interest restriction return contained an inaccuracy.

Right to appeal against penalty or its amount U.K.

35 U.K. A person may, by notice, appeal against—

(a) a decision of an officer of Revenue and Customs that a penalty under paragraph 30 or 32 is payable, or

(b) a decision of an officer of Revenue and Customs as to the amount of a penalty under paragraph 30 or 32.

Procedure on appeal U.K.

36 (1) Notice of an appeal under paragraph 35 must be given— U.K.

(a) within 30 days after the penalty was notified to the person,

(b) to an officer of Revenue and Customs.

(2) On an appeal notified to the tribunal against a decision that a penalty is payable, the tribunal may confirm or cancel the decision.

(3) On an appeal notified to the tribunal against the amount of a penalty, the tribunal may—

(a) confirm the decision, or

(b) substitute for the decision another decision that an officer of Revenue and Customs had power to make.

(4) If the tribunal substitutes its decision for a decision of an officer of Revenue and Customs, the tribunal may rely on paragraph 33(5)—

(a) to the same extent as an officer of Revenue and Customs (which may mean applying the same percentage reduction as the officer to a different starting point), or

(b) to a different extent, but only if the tribunal thinks that the decision in respect of the application of paragraph 33(5) was flawed.

(5) For this purpose “flawed” means flawed when considered in the light of the principles applicable in proceedings for judicial review.

(6) Subject to this Part of this Schedule, the provisions of Part 5 of TMA 1970 relating to appeals have effect in relation to appeals under this Part of this Schedule as they have effect in relation to appeals against an assessment to corporation tax.

Payments between companies in respect of penalties U.K.

37 (1) This paragraph applies if— U.K.

(a) a company (“P”) liable to a penalty under this Part of this Schedule has an agreement in relation to the penalty with one or more other companies within the charge to corporation tax, and

(b) as a result of the agreement, P receives a payment or payments in respect of the penalty that do not, in total, exceed the amount of the penalty.

(2) The payment—

(a) is not to be taken into account in calculating the profits for corporation tax purposes of either P or the company making the payment, and

(b) is not to be regarded as a distribution for corporation tax purposes.]