Taxation (International and Other Provisions) Act 2010

[F1 Effect of interest allowance (alternative calculation) election U.K.

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F1 Pt. 10: the existing Pt. 10 renumbered as Pt. 11 (except for ss. 375, 376 which are repealed), the existing ss. 372-374, 377-382 renumbered as ss. 499-507 and a new Pt. 10 (ss. 372-498) inserted (with effect in accordance with Sch. 5 para. 25(1)-(3)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

423 Capitalised interest brought into account for tax purposes in accordance with GAAP U.K.

(1) Where an interest allowance (alternative calculation) election (see paragraph 16 of Schedule 7A) has effect in relation to a period of account of a worldwide group (“the relevant period of account”), this Chapter applies in relation to the period subject to this section.

(2) Section 413 (adjusted net group-interest expense of a worldwide group) has effect as if—

(a) subsections (3)(a) and (4)(a) (which relate to capitalised interest) did not apply in relation to a GAAP-taxable asset or liability, and

(b) subsections (3)(b) and (4)(b) (which relate to capitalised interest written off) did not apply in relation to a GAAP-taxable asset or liability.

[F2 (2A) Section 413 has effect, in the case of a GAAP-taxable asset that is a relevant asset, as if—

(a) the definition of “upward adjustment” included so much of its carrying value written down in the group’s financial statements for the relevant period of account as is attributable to a relevant expense amount brought into account in the group’s financial statements in determining its carrying value, and

(b) the definition of “downward adjustment” included so much of the reduction of its carrying value written down in the group’s financial statements for the relevant period of account as is attributable to a relevant income amount brought into account in the group’s financial statements in determining its carrying value.

[F3 (2AA) Section 413 has effect, in the case of a GAAP-taxable asset within subsection (2AB), as if—

(a) the definition of “upward adjustment” included so much of its carrying value as is attributable to a relevant expense amount (whether or not that amount is brought into account in the group’s financial statements for the relevant period of account); and

(b) the definition of “downward adjustment” included so much of its carrying value as is attributable to a relevant income amount (whether or not that amount is brought into account in the group’s financial statements for the relevant period of account).

(2AB) A GAAP-taxable asset is within this subsection if it is (or, under section 173 of TCGA 1992, is treated as being) appropriated, in a relevant accounting period in relation to a period of account, from trading stock to fixed assets.]

(2B) For the purposes of subsection (2A) it does not matter whether the relevant expense or income amount is brought into account in determining the asset’s carrying value in the group’s financial statements for the relevant period of account or an earlier period.]

(3) [F4 But subsections [F5 (2)(b), (2A) and (2AA)] of this section are of no effect so far as] the adjusted net group-interest expense of the group for a period of account before the relevant period of account included any amount by virtue of section 413(3)(a) or (4)(a) in respect of the GAAP-taxable asset or liability.

(4) For the purposes of this section an asset or liability is “GAAP-taxable” if any profit or loss for corporation tax purposes in relation to the asset or liability falls to be calculated in accordance with generally accepted accounting practice [F6 (and, for the purposes of this subsection, an asset is a GAAP-taxable asset even if an election under section 730 of CTA 2009 is, or could be, made in respect of it)].

(5) For the purposes of this section, all members of the group are treated as within the charge to corporation tax.

Textual Amendments

F2 S. 423(2A)(2B) inserted (with effect in accordance with Sch. 11 para. 22 of the amending Act) by Finance Act 2019 (c. 1), Sch. 11 para. 7(2)

F3 S. 423(2AA)(2AB) 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. 12(2)

F4 Words in s. 423(3) substituted (with effect in accordance with Sch. 11 para. 22 of the amending Act) by Finance Act 2019 (c. 1), Sch. 11 para. 7(3)

F5 Words in s. 423(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. 12(3)

F6 Words in s. 423(4) inserted (with effect in accordance with Sch. 11 para. 22 of the amending Act) by Finance Act 2019 (c. 1), Sch. 11 para. 7(4)

424 Employers' pension contributions U.K.

(1) Where an interest allowance (alternative calculation) election has effect in relation to a period of account of a worldwide group, this Chapter applies in relation to the period subject to this section.

(2) The definition of “the group's profit before tax” in subsection (2) of section 416 has effect as if references to amounts that are recognised in the financial statements of the group for the period, as items of profit or loss, did not include amounts so recognised in respect of employer pension contributions.

(3) The group's profit before tax, as defined in that section, is reduced by the total of the relief to which members of the group are entitled, by virtue of sections 196 to 200 of FA 2004, in respect of relevant employer pension contributions paid during the period.

(4) In this section—

(a) “employer pension contributions” means contributions paid by an employer under a registered pension scheme in respect of an individual;

(b) employer pension contributions are “relevant” if they are paid at a time at which the employer is a member of the group.

[F7 424A Unpaid employees’ remuneration U.K.

(1) Where an interest allowance (alternative calculation) election has effect in relation to a period of account of a worldwide group, this Chapter applies in relation to the period subject to this section.

(2) The definition of “the group’s profit before tax” in section 416(2) has effect as if references to amounts that are recognised in the financial statements of the group for the period, as items of profit or loss, excluded amounts so recognised in respect of employees’ remuneration that are not paid before the end of the period of 9 months immediately following the end of the period of account.

(3) If—

(a) an amount is, as a result of subsection (2), excluded from the financial statements of the group for the period of account, and

(b) the amount is paid in a later period of account of the group in relation to which an interest allowance (alternative calculation) election has effect,

the definition of “the group’s profit before tax” in section 416(2) has effect as if references to amounts that are recognised in the financial statements of the group for the later period of account, as items of profit or loss, included the amount that is paid in that later period.

(4) Section 1289 of CTA 2009 (unpaid remuneration: supplementary) applies for the purposes of this section as it applies for the purposes of section 1288 of that Act.]

Textual Amendments

F7 S. 424A inserted (with effect in accordance with Sch. 11 para. 22 of the amending Act) by Finance Act 2019 (c. 1), Sch. 11 para. 9

425 Employee share acquisitions U.K.

(1) Where an interest allowance (alternative calculation) election has effect in relation to a period of account of a worldwide group, this Chapter applies in relation to the period subject to this section.

(2) The definition of “the group's profit before tax” in subsection (2) of section 416 has effect as if references to amounts that are recognised in the financial statements of the group for the period, as items of profit or loss, did not include amounts so recognised in respect of employee share acquisition arrangements.

(3) The group's profit before tax, as defined in that section, is reduced by such amount as, on a just and reasonable basis, reflects the effect on the group in the period of—

(a) deductions allowed to members of the group under Part 11 of CTA 2009 (relief for particular employee share acquisition schemes) and amounts treated as received by members of the group under that Part, and

(b) relief given to members of the group under Part 12 of that Act (other relief for employee share acquisitions).

(4) In this section “employee share acquisition arrangements” means arrangements the corporation tax treatment of which is determined under Part 11 or 12 of CTA 2009.

(5) For the purposes of this section, all members of the group are treated as within the charge to corporation tax.

426 Changes in accounting policy U.K.

(1) Where an interest allowance (alternative calculation) election has effect in relation to a period of account of a worldwide group (“the relevant period of account”), this Chapter applies in relation to the period subject to this section.

(2) The financial statements of the group for the relevant period of account are to be treated as subject to such adjustments as would be made to them under the change of accounting policy provisions if the group were a company that—

(a) was within the charge to corporation tax,

(b) held the assets and owed the liabilities recognised in the financial statements, to the extent that they are so recognised, and

(c) carried on the trades and other activities giving rise to amounts recognised in the financial statements as items of profit and loss.

(3) In this section “the change of accounting policy provisions” means [F8 the following provisions as modified by subsection (4)]—

(a) Chapter 14 of Part 3 of CTA 2009 (trading profits);

[F9 (ab) sections 261 and 262 of that Act (property profits);]

(b) sections 315 to 319 of that Act (loan relationships);

(c) sections 613 to 615 of that Act (derivative contracts);

(d) Chapter 15 of Part 8 of that Act (intangible fixed assets);

(e) the Loan Relationships and Derivative Contracts (Change of Accounting Practice) Regulations 2004 (S.I. 2004/3271);

[F10 (f) paragraphs 12 to 17 of Schedule 14 to FA 2019 (transitional provision following the repeal of section 53 of FA 2011) so far as they have effect in relation to adjustments under Chapter 14 of Part 3 of CTA 2009 or sections 261 and 262 of that Act.]

[F11 (4) The provisions mentioned in subsection (3)—

(a) are to have effect for the purposes of this section as if their application were limited to cases where there is a change of accounting policy and as if any election had been made under the provisions, and

(b) are to have effect subject to any modifications necessary for the purposes of this section.]]

Textual Amendments

F8 Words in s. 426(3) inserted (with effect in accordance with Sch. 11 para. 22 of the amending Act) by Finance Act 2019 (c. 1), Sch. 11 para. 10(2)(a)

F9 S. 426(3)(ab) inserted (with effect in accordance with Sch. 11 para. 22 of the amending Act) by Finance Act 2019 (c. 1), Sch. 11 para. 10(2)(b)

F10 S. 426(3)(f) inserted (with effect in accordance with Sch. 14 para. 18(2) of the amending Act) by Finance Act 2019 (c. 1), Sch. 14 para. 18(1)

F11 S. 426(4) substituted (with effect in accordance with Sch. 11 para. 22 of the amending Act) by Finance Act 2019 (c. 1), Sch. 11 para. 10(3)