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F1 Pt. 10: the existing Pt. 10 renumbered as Pt. 11 (except for ss. 375, 376 which are repealed), the existing ss. 372-374, 377-382 renumbered as ss. 499-507 and a new Pt. 10 (ss. 372-498) inserted (with effect in accordance with Sch. 5 para. 25(1)-(3)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

Interest allowance U.K.

396 The interest allowance of a worldwide group for a period of account U.K.

(1) For the purposes of this Part “the interest allowance” of a worldwide group for a period of account of the group is—

where—

A is the basic interest allowance of the group for the period;

B is the amount (if any) of the aggregate net tax-interest income of the group for the period (see section 390(3) and (4)).

(2) In subsection (1) “the basic interest allowance” means—

(a) where no group ratio election is in force in relation to the period, the basic interest allowance calculated using the fixed ratio method (see section 397);

(b) where such an election is in force in relation to the period, the basic interest allowance calculated using the group ratio method (see section 398).

397 Basic interest allowance calculated using fixed ratio method U.K.

(1) For the purposes of section 396, the basic interest allowance of a worldwide group for a period of account of the group, calculated using the fixed ratio method, is the lower of the following amounts—

(a) 30% of the aggregate tax-EBITDA of the group for the period;

(b) the fixed ratio debt cap of the group for the period.

(2) See—

• section 400 for the meaning of “fixed ratio debt cap”;

• section 405 for the meaning of “aggregate tax-EBITDA”.

398 Basic interest allowance calculated using group ratio method U.K.

(1) For the purposes of section 396, the basic interest allowance of a worldwide group for a period of account of the group, calculated using the group ratio method, is the lower of the following amounts—

(a) the group ratio percentage of the aggregate tax-EBITDA of the group for the period;

(b) the group ratio debt cap of the group for the period.

(2) See—

• section 399 for the meaning of “group ratio percentage”;

• section 400 for the meaning of “group ratio debt cap”;

• section 405 for the meaning of “aggregate tax-EBITDA”.

399 The group ratio percentage U.K.

(1) For the purposes of this Part “the group ratio percentage” of a worldwide group for a period of account of the group is (subject to subsection (2)) the following proportion expressed as a percentage—

where—

A is the qualifying net group-interest expense of the group for the period;

B is the group-EBITDA of the group for the period.

(2) “The group ratio percentage” is 100% where—

(a) the percentage determined under subsection (1) is negative or higher than 100%, or

(b) B in that subsection is zero.

(3) See—

• section 414 for the meaning of “qualifying net group-interest expense”;

• section 416 for the meaning of “group-EBITDA”.

400 The debt cap U.K.

(1) For the purposes of section 397 (and this section), “the fixed ratio debt cap” of a worldwide group for a period of account of the group is the sum of the following amounts—

(a) the adjusted net group-interest expense of the group for the period;

(b) the excess debt cap of the group that was generated in the immediately preceding period of account of the group (if any) (see subsections (3) to (7)).

(2) For the purposes of section 398 (and this section), “the group ratio debt cap” of a worldwide group for a period of account of the group is the sum of the following amounts—

(a) the qualifying net group-interest expense of the group for the period;

(b) the excess debt cap of the group that was generated in the immediately preceding period of account of the group (if any) (see subsections (3) to (7)).

(3) Where no group ratio election is in force in relation to a period of account of a worldwide group (“the generating period”), “the excess debt cap” of the group that is generated in the period is (subject to subsections (5) and (6))—

where—

A is the fixed ratio debt cap of the group for the generating period;

B is 30% of the aggregate tax-EBITDA of the group for the generating period.

(4) Where a group ratio election is in force in relation to a period of account of a worldwide group (“the generating period”), “the excess debt cap” of the group that is generated in the period is (subject to subsections (5) and (6))—

where—

A is the group ratio debt cap of the group for the generating period;

B is the group ratio percentage of the aggregate tax-EBITDA of the group for the generating period.

(5) Where the amount determined under subsection (3) or (4) is negative, “the excess debt cap” of the group that is generated in the period is nil.

(6) Where the amount determined under subsection (3) or (4) is greater than the carry-forward limit, “the excess debt cap” of the group that is generated in the period is the carry-forward limit.

(7) For this purpose the “carry-forward limit” is the sum of the following amounts—

(a) the excess debt cap generated in the period of account of the group immediately preceding the generating period (if any);

(b) the total disallowed amount of the group in the generating period.

(8) See—

• section 373 for the meaning of “the total disallowed amount”;

• section 405 for the meaning of “aggregate tax-EBITDA”;

• section 413 for the meaning of “adjusted net group-interest expense”;

• section 414 for the meaning of “qualifying net group-interest expense”.

[F2 400A Carry forward of excess debt cap: 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.

(3) In determining in accordance with section 400 [F3 the new group’s fixed ratio debt cap] or group ratio debt cap for its first period of account, its excess debt cap generated in the immediately preceding period of account is taken to be that of the old group for the period of account of the old group [F4 ending on the day before the takeover day (see section 395A(3))].]]

Textual Amendments

F2 S. 400A inserted (with effect in accordance with Sch. 11 para. 23 of the amending Act) by Finance Act 2019 (c. 1), Sch. 11 para. 4

F3 Words in s. 400A(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. 4(a)

F4 Words in s. 400A(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. 4(b)