Part 7Tax treatment of financing costs and income
CHAPTER 8“Tested expense amount” and “tested income amount”
329The tested expense amount
1
References in this Part to the “tested expense amount” for a period of account of the worldwide group are to the sum of the net financing deductions of each relevant group company.
2
References in this Part to the “net financing deduction” of a company for a period of account of the worldwide group are to—
a
the sum of the company's financing expense amounts for the period (see section 313), less
b
the sum of the company's financing income amounts for the period (see section 314).
3
References in subsection (2) to a company's financing expense amounts or financing income amounts for a period of account of the worldwide group do not include any amount that arises as a result of a transaction that takes place at a time at which the company is not a relevant group company.
4
If the amount determined in accordance with subsection (2) is negative, the net financing deduction of the company for the period is nil.
5
If the amount determined in accordance with subsection (2) is small (see section 331), the net financing deduction of the company for the period is nil.
330The tested income amount
1
References in this Part to the “tested income amount” for a period of account of the worldwide group are to the sum of the net financing incomes of each UK group company.
2
The reference in subsection (1) to the “net financing income” of a company for a period of account of the worldwide group is to—
a
the sum of the company's financing income amounts for the period (see section 314), less
b
the sum of the company's financing expense amounts for the period (see section 313).
3
References in subsection (2) to a company's financing expense amounts or financing income amounts for a period of account of the worldwide group do not include any amount that arises as a result of a transaction that takes place at a time at which the company is not a UK group company.
4
If the amount determined in accordance with subsection (2) is negative, the net financing income of the company for the period is nil.
5
If the amount determined in accordance with subsection (2) is small (see section 331), the net financing income of the company for the period is nil.
331Companies with net financing deduction or net financing income that is small
1
An amount determined in accordance with section 329(2) or 330(2) is “small” if it is less than £500,000.
2
The Treasury may by order amend subsection (1) by substituting a higher or lower amount for the amount for the time being specified there.
3
An order under subsection (2) may only be made if a draft of the statutory instrument containing the order has been laid before and approved by a resolution of the House of Commons.
4
An order under subsection (2) may only have effect in relation to periods of account of the worldwide group beginning after the date on which the order is made.
331AF1Mismatches between tax treatment and accounting treatment
1
The Commissioners may make regulations for the purpose of altering the way in which the tested expense amount or the tested income amount is calculated in a case in which an accounts amount in respect of a matter is not equal to the tax amount in respect of that matter.
2
For this purpose—
a
the “accounts amount” in respect of a matter is—
i
the amount disclosed in the financial statements of the worldwide group in respect of the matter, or
ii
if no amount is so disclosed, nil, and
b
the “tax amount” in respect of a matter is—
i
the amount of the deduction to which a member of the worldwide group is entitled under a provision of the Corporation Tax Acts in respect of the matter,
ii
if more than one member is entitled to such a deduction, the total such deductions, or
iii
if no member is entitled to such a deduction, nil.
3
Regulations under this section may amend any provision of this Part.
4
Regulations under this section may have effect in relation to periods of account of the worldwide group beginning on or after the beginning of the calendar year in which the regulations are made.
5
Regulations under this section may include provision for the worldwide group to elect that the regulations (or any of them)—
a
are not to apply in relation to the group, or
b
are not to apply in relation to periods of account of the worldwide group beginning before the date on which the regulations are made.