Chapter 3: Disallowance of deductions
Overview
553.This Chapter applies if the “tested expense amount” exceeds the “available amount”. In broad terms, the “tested expense amount” is the aggregate of the net amount of financing expense payable by each of the relevant group companies that have net financing expense, while the “available amount” is the external gross finance expense of the worldwide group of companies. The excess is the amount of financing expense that must be disallowed in computing the corporation tax profits of the relevant group companies. This Chapter also sets out how the group should notify HMRC of the allocation of the disallowance between the relevant group companies by submitting an allocation statement, and provides for an alternative procedure if the group fails to do so.
Section 274: Application of Chapter and meaning of “total disallowed amount”
554.This section applies the Chapter if, for any period of account (“the relevant period of account”) of the “worldwide group”, the “tested expense amount” exceeds the “available amount”. It is based on paragraph 15 of Schedule 15 to FA 2009.
Section 275: Meaning of “company to which this Chapter applies”
555.This section provides that the Chapter applies to a company that is a relevant group company at any time during the relevant period of account. It is based on paragraph 16 of Schedule 15 to FA 2009.
Section 276: Appointment of authorised company for relevant period of account
556.This section provides that the companies to which the Chapter applies may appoint one of their number to act on their behalf for the relevant period of account in respect of matters governed by the Chapter. It is based on paragraph 17 of Schedule 15 to FA 2009.
Section 277: Meaning of “the reporting body”
557.This section defines the term “the reporting body” for the purposes of this Chapter as the company appointed under section 276 for the relevant period of account, or the companies to which this Part applies (acting jointly) if no such appointment has effect. It is based on paragraph 18 of Schedule 15 to FA 2009.
Section 278: Statement of allocated disallowances: submission
558.This section requires the reporting body to send a “statement of allocated disallowances” for the relevant period of account to HMRC. It is based on paragraph 19 of Schedule 15 to FA 2009.
Section 279: Statement of allocated disallowances: submission of revised statement
559.This section allows the reporting body to submit a revised statement to HMRC, with subsequent revisions also being allowed. It is based on paragraph 20 of Schedule 15 to FA 2009.
Section 280: Statement of allocated disallowances: requirements
560.This section sets out the requirements of a statement of allocated disallowances. It is based on paragraph 21 of Schedule 15 to FA 2009.
Section 281: Statement of allocated disallowances: effect
561.This section gives the effect of the statement of allocated disallowances, namely that a financing expense amount of a company specified in a statement is not to be brought into account by the company for corporation tax purposes. It is based on paragraph 22 of Schedule 15 to FA 2009.
Section 282: Company tax returns
562.This section provides that where a company has delivered a company tax return for the relevant period, and as a result of a revised statement either the amount of profits on which corporation tax is chargeable for a relevant accounting period of a company changes, or any other information contained in the return is rendered incorrect, then the company is treated as having amended its return for the accounting period so as to reflect the change or correct the information. It is based on paragraph 23 of Schedule 15 to FA 2009.
Section 283: Power to make regulations about statement of allocated disallowances
563.This section provides a regulation-making power to allow the Commissioners for HMRC to introduce rules governing a statement of allocated disallowances, and mentions matters that may be covered in particular circumstances. It is based on paragraph 24 of Schedule 15 to FA 2009.
Section 284: Failure of reporting body to submit statement of allocated disallowances
564.This section sets out the consequences of a failure by a reporting body to submit a statement of allocated disallowances that complies with the requirements of section 280. It is based on paragraph 25 of Schedule 15 to FA 2009.
Section 285: Powers to make regulations in relation to reductions under section 284
565.This section provides a regulation-making power to allow the Commissioners for HMRC to introduce rules to ensure that a company in relation to which a financing expense amount is reduced under section 284 has sufficient information to determine its amount and describes matters that may be covered in particular. It is based on paragraph 26 of Schedule 15 to FA 2009.