SCHEDULES
SCHEDULE 5U.K.Corporate interest restriction
PART 3 U.K.Consequential amendments
TIOPA 2010: other amendmentsU.K.
12U.K.TIOPA 2010 is amended as follows.
13U.K.In section 1 (overview of Act), in subsection (1)—
(a)omit the “and” at the end of paragraph (d), and
(b)after paragraph (e) insert—
“(f)Part 9A (controlled foreign companies), and
(g)Part 10 (corporate interest restriction).”
14U.K.In section 155 (transfer pricing: “potential advantage” in relation to United Kingdom taxation), in subsection (6), for paragraph (a) substitute—
“(a)Part 10 (corporate interest restriction),”.
15U.K.In section 157 (direct participation), in subsection (1)—
(a)omit the “and” at the end of paragraph (c), and
(b)after paragraph (d) insert “, and
(e)in Part 10, section 463(4).”
16U.K.In section 159 (indirect participation: potential direct participant), in subsection (1)—
(a)omit the “and” at the end of paragraph (c), and
(b)after paragraph (d) insert “, and
(e)in Part 10, section 463(4).”
17U.K.In section 160 (indirect participation: one of several major participants), in subsection (1)—
(a)omit the “and” at the end of paragraph (c), and
(b)after paragraph (d) insert “, and
(e)in Part 10, section 463(4).”
18U.K.In section 259CB (financial instruments: hybrid or otherwise impermissible deduction/non-inclusion mismatches and their extent), in subsection (6), for paragraph (e) substitute—
“(e)Part 10 (corporate interest restriction).”
19U.K.In section 259DC (hybrid transfer deduction/non-inclusion mismatches and their extent), in subsection (5), for paragraph (d) substitute—
“(d)Part 10 (corporate interest restriction).”
20U.K.After section 259NE (treatment of a person who is a member of a partnership) insert—
“PriorityU.K.
259NEAPriority
For the purposes of this Part, the provisions of Part 10 (corporate interest restriction) are to be treated as of no effect.”
21(1)Chapter 3 of Part 9A (CFCs: the CFC charge gateway) is amended as follows.U.K.
(2)In section 371CE (which makes provision for determining whether Chapter 6 of Part 9A applies)—
(a)in subsection (2)(a), after “period” insert “ (see section 371CEA) ”, and
(b)omit subsections (4) and (5).
(3)After section 371CE insert—
“371CEASection 371CE: meaning of “group treasury company”
(1)This section makes provision for determining whether the CFC is a group treasury company in the accounting period for the purposes of section 371CE.
(2)The CFC is a group treasury company in the accounting period if—
(a)it is a member of a worldwide group in relation to a period of account in which the accounting period wholly or partly falls,
(b)throughout the accounting period—
(i)all, or substantially all, of the activities undertaken by it consist of treasury activities undertaken for the group, and
(ii)all, or substantially all, of its assets and liabilities relate to such activities, and
(c)at least 90% of its relevant income for the accounting period is group treasury revenue.
(3)For the purposes of this section a company undertakes treasury activities for the group if it does one or more of the following in relation to, or on behalf of, the group or any of its members—
(a)managing surplus deposits of money or overdrafts,
(b)making or receiving deposits of money,
(c)lending money,
(d)subscribing for or holding shares in a company which is a UK group company undertaking treasury activities for the group at least 90% of whose relevant income is group treasury revenue for its relevant accounting period,
(e)investing in debt securities, and
(f)hedging assets, liabilities, income or expenses.
(4)For the purposes of this section “group treasury revenue”, in relation to a company, means revenue—
(a)arising from the treasury activities that the company undertakes for the group, and
(b)accounted for as such under generally accepted accounting practice,
before any deduction (whether for expenses or otherwise).
(5)But revenue consisting of a dividend or other distribution is not group treasury revenue of the company unless it is from a company that meets the conditions in subsection (3)(d).
(6)In this section—
“debt security” has the same meaning as in the Handbook made by the Financial Conduct Authority or Prudential Regulation Authority under the Financial Services and Markets Act 2000 (as the Handbook in question has effect from time to time),
“period of account” has the same meaning as in Part 10,
“relevant accounting period” has the same meaning as in Part 10,
“relevant income”, in relation to a company, means income—
(a)arising from the activities of the company, and
(b)accounted for as such under generally accepted accounting practice,
before any deduction (whether for expenses or otherwise),
“UK group company” has the same meaning as in Part 10, and
“worldwide group” has the same meaning as in Part 10.”
(4)In consequence of the amendments made by this paragraph, in Schedule 47 to FA 2013, omit paragraph 17.
22(1)Chapter 9 of Part 9A (CFCs: exemption for profits from qualifying loan relationships) is amended as follows.U.K.
(2)For section 371IE substitute—
“371IEThe “matched interest profits” exemption
(1)This section applies if—
(a)there are profits of qualifying loan relationships which are not exempt after sections 371IB and 371ID have been applied to each qualifying loan relationship,
(b)the relevant corporation tax accounting period (as defined in section 371BC(3)) of company C is a relevant accounting period of it in relation to a period of account of a worldwide group,
(c)the CFC's accounting period ends in that period of account, and
(d)apart from this section, the profits mentioned in paragraph (a) would be included in the chargeable profits of the CFC.
(2)In this section “the matched interest profits” means so much of the profits mentioned in subsection (1)(a) as remain after excluded credits and excluded debits are left out of account.
(3)If the aggregate net tax-interest expense of the group for the period is nil, all of the matched interest profits are exempt.
(4)Otherwise, there is a more limited exemption if the relevant proportion of the matched interest profits apportioned to C or other relevant chargeable companies exceeds the aggregate net tax-interest expense of the group for the period.
(5)For the purposes of this section “the relevant proportion of the matched interest profits apportioned to C or other relevant chargeable companies” is determined as follows.
Step 1 For each relevant chargeable company (including C) determine the percentage (P%) of the CFC's chargeable profits that are apportioned to the company under step 5 of section 371BC(1).
Step 2 For each relevant chargeable company (including C) multiply P% by the matched interest profits.
Step 3 The sum of the amounts for each company found under step 2 is “the relevant proportion of the matched interest profits apportioned to C or other relevant chargeable companies”.
(6)For the purposes of this section a company is a relevant chargeable company if the relevant corporation tax accounting period of the company is a relevant accounting period in relation to the period of account of the group.
(7)The limited exemption is given effect by treating the matched interest profits as equal to the amount found by multiplying the amount that they would otherwise be by—
where—
E is the amount of the excess mentioned in subsection (4), and
RPMIP is the relevant proportion of the matched interest profits apportioned to C or other relevant chargeable companies.
(8)For the purposes of this section the aggregate net tax-interest expense of a worldwide group for a period of account is determined in accordance with Part 10 (corporate interest restriction) but without regard to debits, credits or other amounts arising from—
(a)banking business carried on by a company within the charge to corporation tax, or
(b)insurance business carried on by a company within the charge to corporation tax.
(9)For the purposes of this section—
“excluded credit” has the meaning given by section 386(3),
“excluded debit” has the meaning given by section 383(3), and
“period of account”, “relevant accounting period” and “worldwide group” have the same meanings as in Part 10.”
(3)In section 371IJ (claims), in subsection (6), for “the tested income amount or the tested expense amount mentioned in section 371IE(2)” substitute “ the aggregate net tax-interest expense that is mentioned in section 371IE ”.
23(1)Chapter 19 of Part 9A (CFCs: assumed taxable total profits, assumed total profits and the corporation tax assumptions) is amended as follows.U.K.
(2)In section 371SL (group relief etc), at the end insert—
“(4)This section is subject to section 371SLA (corporate interest restriction).”
(3)After section 371SL insert—
“371SLACorporate interest restriction
(1)This section applies for the purpose of applying Part 10 (corporate interest restriction).
(2)Assume—
(a)that the CFC is a member of a worldwide group for a period of account of which it would be a member if section 371SL were ignored, and
(b)that the CFC is the only UK group company in the period (within the meaning of that Part).
(3)Assume also that Part 10 applies as if subsections (2) and (3) of section 392 (interest capacity of the group: the de minimis amount) were omitted.”
24U.K.In Schedule 11, at the end insert—
“PART 7 U.K.Corporate interest restriction: index of defined expressions used in Part 10
| abbreviated interest restriction return (in Part 10) | paragraph 20 of Schedule 7A |
| abbreviated return election (in Part 10) | paragraph 19 of Schedule 7A |
| accounting period (in Part 10) | Chapter 2 of Part 2 of CTA 2009 (applied by section 1119 of CTA 2010) |
| adjusted net group-interest expense of a worldwide group (in Part 10) | section 413 |
| aggregate net tax-interest expense of a worldwide group (in Part 10) | section 390 |
| aggregate net tax-interest income of a worldwide group (in Part 10) | section 390 |
| aggregate tax-EBITDA of a worldwide group (in Part 10) | section 405 |
| allocated reactivation of company for period of account (in Part 10) | paragraph 25 of Schedule 7A |
| allowable loss (in Part 10) | TCGA 1992 (applied by section 1119 of CTA 2010) |
| associated (in Chapter 8 of Part 10) | section 449(2) |
| amount available for reactivation of company in period of account (in Part 10) | paragraph 26 of Schedule 7A |
| available, in relation to interest allowance (in Chapter 4 of Part 10) | section 393 |
| balance sheet (in Chapter 8 of Part 10) | section 449(1) |
| chargeable gain (in Part 10) | TCGA 1992 (applied by section 1119 of CTA 2010) |
| the Commissioners (in Part 10) | section 494(1) |
| company (in Part 10) | section 1121 of CTA 2010 |
| company tax return (in Schedule 7A) | paragraph 73 of Schedule 7A |
| consenting company (in Part 10) | paragraph 10 of Schedule 7A |
| consolidated partnership (in Part 10) | section 430 |
| consolidated subsidiary of another entity (in Part 10) | section 475 |
| derivative contract (in Part 10) | Part 7 of CTA 2009 (applied by section 1119 of CTA 2010) |
| disallowed, in relation to tax-interest expense amount (in Part 10) | section 378 |
| drawn up on acceptable principles, in relation to financial statements (in Chapter 11 of Part 10) | section 481 |
| fair value accounting (in Part 10) | section 494(1) |
| fair value (in Part 10) | section 494(1) |
| filing date, in relation to a period of account of a worldwide group (in Part 10) | paragraph 7(5) of Schedule 7A |
| finance lease (in Part 10) | section 494(1) |
| financial asset (in Chapter 8 of Part 10) | section 449(1) |
| financial statements of a worldwide group (in Part 10) | section 479 |
| fixed ratio method (in Part 10) | section 397 |
| for accounting purposes (in Part 10) | section 1127(4) of CTA 2010 |
| full interest restriction return (in Part 10) | paragraph 20 of Schedule 7A |
| generally accepted accounting practice (in Part 10) | section 1127(1) and (3) of CTA 2010 |
| group-EBITDA (chargeable gains) election (in Part 10) | paragraph 15 of Schedule 7A |
| group ratio election (in Part 10) | paragraph 13 of Schedule 7A |
| group ratio (blended) election (in Part 10) | paragraph 14 of Schedule 7A |
| group ratio method (in Part 10) | section 398 |
| group ratio percentage (in Part 10) | section 399 |
| IAS financial statements (in Part 10) | section 488 |
| impairment loss (in Part 10) | section 391 |
| income (in Part 10) | section 1119 of CTA 2010 |
| insurance company (in Part 10) | section 141 of FA 2012 |
| interest allowance of a worldwide group (in Part 10) | section 396 |
| interest allowance (alternative calculation) election (in Part 10) | paragraph 16 of Schedule 7A |
| interest allowance (consolidated partnerships) election (in Part 10) | paragraph 18 of Schedule 7A |
| interest allowance (non-consolidated investment) election (in Part 10) | paragraph 17 of Schedule 7A |
| interest capacity of a worldwide group (in Part 10) | section 392 |
| interest reactivation cap of a worldwide group (in Part 10) | section 373 |
| interest restriction return (in Part 10) | section 494(1) |
| international accounting standards (in Part 10) | section 1127(5) of CTA 2010 |
| investor in a worldwide group (in Part 10) | section 404 |
| loan relationship (in Part 10) | Part 5 of CTA 2009 (applied by section 1119 of CTA 2010) |
| loan relationships or other financing arrangements (in Chapter 8 of Part 10) | section 449(1) |
| local authority (in Part 10) | section 1130 of CTA 2010 |
| local authority association (in Part 10) | section 1131 of CTA 2010 |
| member of a worldwide group (in Part 10) | section 473(4)(a) |
| multi-company worldwide group (in Part 10) | section 473(4)(d) |
| net group-interest expense of a worldwide group (in Part 10) | section 410 |
| net tax-interest expense of a company (in Part 10) | section 389 |
| net tax-interest income of a company (in Part 10) | section 389 |
| non-consenting company (in Part 10) | paragraph 10 of Schedule 7A |
| non-consolidated associate of a worldwide group (in Part 10) | section 429 |
| non-consolidated subsidiary of an entity (in Part 10) | section 475 |
| notice (in Part 10) | section 1119 of CTA 2010 |
| party to a loan relationship (in Part 10) | section 494(2) |
| period of account of a worldwide group (in Part 10) | section 480 |
| profit before tax, of a worldwide group (in Chapter 7 of Part 10) | section 416 |
| pro-rata share of company (of total disallowed amount) (in Part 10) | paragraph 23 of Schedule 7A |
| pro-rata share of accounting period (of total disallowed amount) (in Part 10) | paragraph 24 of Schedule 7A |
| provision (in relation to a public infrastructure asset) (in Chapter 8 of Part 10) | section 436 |
| public infrastructure asset (in Chapter 8 of Part 10) | section 436 |
| qualifying charitable donation (in Part 10) | Part 6 of CTA 2010 (applied by section 1119 of CTA 2010) |
| qualifying infrastructure company (in Chapter 8 of Part 10) | section 433 |
| qualifying infrastructure activity (in Chapter 8 of Part 10) | section 436 |
| qualifying net group-interest expense of a worldwide group (in Part 10) | section 414 |
| recognised, in financial statements (in Part 10) | section 489 |
| recognised stock exchange (in Part 10) | section 1137 of CTA 2010 |
| registered pension scheme (in Part 10) | section 150(2) of FA 2004 (applied by section 1119 of CTA 2010) |
| related party (in Part 10) | sections 462 to 472 |
| related party investor (in Part 10) | section 404 |
| relevant asset (in Chapter 7 of Part 10) | section 417 |
| relevant accounting period (in Part 10) | section 490 |
| relevant expense amount (in Chapter 7 of Part 10) | section 411 |
| relevant income amount (in Chapter 7 of Part 10) | section 411 |
| relevant public body (in Part 10) | section 491 |
| reporting company (in Part 10) | section 494(1) |
| the return period (in Part 10) | section 494(1) |
| service concession agreement (in Part 10) | section 494(1) |
| share, of an investor in a worldwide group (in Part 10) | section 404 |
| single-company worldwide group (in Part 10) | section 473(4)(c) |
| subject to interest reactivations (in Part 10) | section 373 |
| subject to interest restrictions (in Part 10) | section 373 |
| tax (in Part 10) | section 1119 of CTA 2010 |
| tax-EBITDA of a company (in Part 10) | section 406 |
| tax-interest expense amount of a company (in Part 10) | section 382 |
| tax-interest income amount of a company (in Part 10) | section 385 |
| trade (in Part 10) | section 1119 of CTA 2010 |
| total disallowed amount of a worldwide group (in Part 10) | section 373 |
| UK generally accepted accounting practice (in Part 10) | section 1127(2) of CTA 2010 |
| UK group company (in Part 10) | section 492 |
| UK property business (in Part 10) | Chapter 2 of Part 4 of CTA 2009 (applied by section 1119 of CTA 2010) |
| the UK sector of the continental shelf (in Chapter 8 of Part 10) | section 449(1) |
| the ultimate parent, of a worldwide group (in Part 10) | section 473(4)(b) |
| unexpired (in Chapter 4 of Part 10) | section 395 |
| United Kingdom (in Part 10) | section 1170 of CTA 2010 |
| used (in Chapter 4 of Part 10) | section 394 |
| within the charge to corporation tax (in Part 10) | section 1167 of CTA 2010 |
| wholly-owned subsidiary (in Part 10) | section 494(1) |
| a worldwide group (in Part 10) | section 473” |