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Taxation (International and Other Provisions) Act 2010

Chapter 7: “Financing expense amount” and “financing income amount”
Overview

596.This Chapter explains what is meant by “financing expense amount” and “financing income amount” of a company. These amounts are used in Chapter 8 to compute the “tested expense amount” and “tested income amount” which in turn are used, together with the “available amount” (defined in Chapter 9), to calculate the amounts, if any, of the financing expense incurred by relevant group companies to be disallowed and of the financing income receivable by UK group companies to be exempted. In setting the basic rules for the “financing expense amount” this Chapter includes specific activities or certain types of finance amount.

Section 313: The financing expense amounts of a company

597.This section provides that a “financing expense amount” of a worldwide group company for a period of account is an amount that is brought into account for corporation tax purposes in accordance with condition A, B or C . It is based on paragraph 54 of Schedule 15 to FA 2009.

Section 314: The financing income amounts of a company

598.This section provides that a “financing income amount” of a worldwide group company for a period of account is an amount that is brought into account for corporation tax purposes in accordance with condition A, B or C . It is based on paragraph 55 of Schedule 15 to FA 2009.

Section 315: Interpretation of sections 313 and 314

599.This section provides that various terms used in sections 313 and 314 have the same meaning as they do in the loan relationships rules in CTA 2009. It is based on paragraph 56 of Schedule 15 to FA 2009.

Section 316: Group treasury companies

600.This section excludes financing expense or income amounts if the company is a group treasury company during the worldwide group’s period of account. It is based on paragraph 57 of Schedule 15 to FA 2009.

Section 317: Real estate investment trusts

601.This section provides for an exclusion from financing expense or income amounts for amounts taken into account in computing profits exempted from tax by virtue of the special rules applying to real estate investment trusts. It is based on paragraph 58 of Schedule 15 to FA 2009.

Section 318: Companies engaged in oil extraction activities

602.This section excludes the financing expense or income amounts if a company is engaged in oil extraction activities within the meaning of section 277 of CTA 2010. It is based on paragraph 59 of Schedule 15 to FA 2009.

Section 319: Intra-group short-term finance: financing expense

603.This section prevents an intra-group short-term financing expense which meets condition A in section 313 from being treated as a finance expense. It is based on paragraph 60 of Schedule 15 to FA 2009.

Section 320: Intra-group short-term finance: financing income

604.This section excludes intra-group short-term financing income from being treated as such if the corresponding finance expense is not treated as a financing expense in accordance with section 319. It is based on paragraph 61 of Schedule 15 to FA 2009.

Section 321: Short-term loan relationships

605.This section explains which finance arrangements can be treated as short-term loan arrangements for the purposes of section 319. It is based on paragraph 62 of Schedule 15 to FA 2009.

Section 322: Stranded deficits in non-trading loan relationships: financing expense

606.This section deals with stranded deficits in non-trading loan relationships from the perspective of the company incurring the financing expense and prevents a financing expense which meets condition A in section 313 from being treated as such. It is based on paragraph 63 of Schedule 15 to FA 2009.

Section 323: Stranded deficits in non-trading loan relationships: financing income

607.This section prevents an amount from being treated as financing income if the corresponding financing expense is not treated as such under section 322. It is based on paragraph 64 of Schedule 15 to FA 2009.

Section 324: Stranded management expenses in non-trading loan relationships: financing expense

608.This section deals with stranded management expenses in non-trading loan relationships from the perspective of the company incurring the financing expense and prevents a financing expense which meets condition A in section 313 from being treated as such. It is based on paragraph 65 of Schedule 15 to FA 2009.

Section 325: Stranded management expenses in non-trading loan relationships: financing income

609.This section prevents an amount from being treated as financing income if the corresponding financing expense is not treated as such under section 324. It is based on paragraph 66 of Schedule 15 to FA 2009.

Section 326: Charities

610.This section excludes relevant amounts paid to charities from being taken into account in computing any disallowance under this Part. This prevents a disallowance being made where a corresponding disregard of amounts receivable is not available because of the tax status of the receiving body. The section is based on paragraph 67 of Schedule 15 to FA 2009.

Section 327: Educational and public bodies

611.This section excludes relevant amounts paid to certain educational and public bodies from being taken into account in computing any disallowance under this Part. This prevents a disallowance being made where a corresponding disregard of amounts receivable is not available because of the tax status of the receiving body. The section is based on paragraph 68 of Schedule 15 to FA 2009.

Section 328: Interpretation of sections 316 to 327

612.This section defines “finance arrangement” for the purposes of sections 316 to 327. It is based on paragraph 69 of Schedule 15 to FA 2009.

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