Chapter CFM99500
| Published date | 16 April 2016 |
| Record Number | CFM99500 |
| Court | HM Revenue & Customs |
This glossary is designed to give a brief description of each term and provide you with a link to the most relevant provision in the corporate interest restriction (CIR) legislation and the most relevant guidance.
Underlined terms also appear in the glossary, but are not hyperlinked. References to Corporate Finance Manual (CFM) pages are hyperlinked. The glossary also identifies the elections that may be made in applying the legislation.
There is also a collation of terms particularly relevant to carry-forward rules at CFM98220.
An index of defined expressions used in TIOPA10/PT10 can be found at TIOPA10/SCH11/PT7.
Abbreviated interest restriction return (for a worldwide group) TIOPA10/SCH7A/PARA20, CFM98440An abbreviated interest restriction return is an interest restriction return with more limited content, which is valid where the worldwide group is not subject to interest restrictions in the return period and where the reporting company has made an abbreviated return election. It identifies the UK group companies in the worldwide group, but does not contain a statement of calculations.
Abbreviated return election TIOPA10/SCH7A/PARA18, CFM98460, CFM98440A reporting company may elect to make an abbreviated interest restriction return where the worldwide group is not subject to interest restriction in the return period. The election is made within an interest restriction return for the period of account to which the election relates.
Accounting period CTA09/CH2This term is used in relation to UK group companies and takes its normal corporation tax meaning. Worldwide groups have periods of account.
Accounts-free period TIOPA110/S485, S486, CFM95420, CFM95430A period for which a worldwide group does not or is treated as not drawing up consolidated financial statements. Its periods of account are then 12-month periods starting at the beginning of the accounts free-period (“default periods of account”) - unless it makes an election under S486 to set a different date.
Adjusted net group-interest expense (of a worldwide group) - ANGIE TIOPA10/S413, CFM95950Adjusted net group-interest expense of the worldwide group (ANGIE) is added to any excess debt cap brought forward amount to calculate the fixed ratio debt cap. It is calculated for a worldwide group for a period of account by making certain adjustments to the net group-interest expense (NGIE) of the group for the period. Adjustments are made for capitalised interest, interest recognised as equity, amounts in respect of debt releases/modifications and dividends payable on preference shares. ANGIE is also the starting point for computing qualifying adjusted net group-interest expense (QNGIE), which is used in applying the group ratio method.
Aggregate net tax-interest expense (of a worldwide group) TIOPA10/S390, CFM95605The aggregate net tax-interest expense (ANTIE) of a worldwide group is fundamental to the corporate interest restriction regime and is measure of a worldwide group’s net corporation tax deduction, if any, for tax-interest. Its computation involves the aggregation of tax-interest expense amounts and tax-interest income amounts of the group’s UK group companies. Specifically, it is computed as the excess (if any) of the aggregate of the tax-interest expense amounts of the group’s “relevant companies” over the aggregate of the tax-interest income amounts of the group’s relevant companies. A relevant company is a company that is a UK group company for all or part of the worldwide group’s period of account.
A negative sum is treated as zero (and would constitute the group’s aggregate net tax-interest income).
Aggregate net tax-interest income (of a worldwide group) TIOPA10/S390, CFM95605The aggregate net tax-interest income of a worldwide group is the converse of aggregate net tax-interest expense and cannot be a negative number. It is computed as the excess (if any) of the aggregate of the tax-interest income amounts of the group’s relevant companies over the aggregate of the tax-interest expense amounts of the group’s relevant companies. A relevant company is a company that is a UK group company for all or part of the worldwide group’s period of account.
It is a component of interest allowance and can increase the amount available to be carried forward.
Aggregate tax-EBITDA (of a worldwide group) TIOPA10/S405Aggregate tax-EBITDA is a tax measure of the worldwide group’s Earnings Before Interest, Taxes, Depreciation and Amortisation. The starting point in the computation is the amounts taken into account in computing the corporation tax position of companies in the group, so a UK tax nexus is implicit.
Aggregate tax-EBITDA is used in the calculation of the interest allowance of the group for a period of account (and hence the total disallowed amount or interest reactivation cap and any interest allowance available to carry forward) under the fixed ratio method or the group ratio method. It is the sum of the amounts of tax-EBITDA of each company that was a member of the worldwide group for part or all of the period of account. Positive and negative amounts can be aggregated, but a negative total is treated as aggregate tax-EBITDA of zero.
Alternative calculation TIOPA10/S423-S426, CFM96630The alternative calculation provisions are applied where an interest allowance (alternative calculation) election is in effect. This election is irrevocable. Notwithstanding the name of the election, the method applies to the calculation of both group-interest and group-EBITDA. Its effect is to more closely align these amounts with UK tax rules. As it can alter the calculation of the applicable debt cap, it can be applied whether or not a group ratio election is in effect.
Application of the method can change the amounts brought into account in respect of capitalised interest, employer’s pension contributions, employee share schemes and changes in accounting policy.
Amount available for reactivation (of a company) TIOPA10/SCH7A/PARA26, CFM98620This amount limits the amount of previously disallowed tax-interest that a UK group company may reactivate in the period of account of a worldwide group of which it is a member for at least some of its accounting period. The limit takes account of both the tax history of the company and the worldwide group’s interest reactivation cap.
The formula is not straightforward, because it must deal with company accounting periods that may not coincide with the worldwide group’s period of account and the possibility that a company may join or leave a worldwide group during the group’s period of account. The limit is the lower of two amounts. The first is the worldwide group’s interest reactivation cap restricted on a time basis where the company is not a member of the group for its entire period of account. The second is the amount of cumulative disallowed tax-interest of the company that has not either already been reactivated in or before the company’s “specified accounting period” (or, where that accounting straddles two worldwide group periods of account, offset against amounts that would otherwise have been disallowed).
The specified accounting period is the first relevant accounting period of the company (that is straddling the worldwide group period of account) in which the company is a member of the worldwide group.
Within a worldwide group period of account, amounts must be reactivated in an earlier company accounting period before a later one.
Associate TIOPA10/S429(5)In the context of the definition of a non-consolidated associate, “associate” takes its accountancy meaning.
Associated TIOPA10/S449(2) CFM97420For the purposes of the public infrastructure provisions in Chapter 8, a company is associated with another company where the companies are members of the same worldwide group.
Associated worldwide group TIOPA10/S428, CFM96770This is a term used in the rules describing the non-consolidated investment provisions, which apply where an interest allowance (non-consolidated investment) election is in effect in relation to a specified non-consolidated associate. It is the worldwide group of which the specified non-consolidated associate is the ultimate parent. Note that an associated worldwide group could be a single entity - in effect a single company worldwide group.
Available (interest allowance of a worldwide group) TIOPA10/S393, CFM98240This is the amount of interest allowance from an earlier worldwide group period of account (the “generating period”) that is available for use (in computing the worldwide group’s interest capacity and thence its total disallowed amount or interest reactivation cap) in a later period of account (the “receiving period”) because it has neither been used nor time-expired. Detailed rules apply. See also unexpired and used interest allowance of a worldwide group.
Basic interest allowance (of a worldwide group) TIOPA10/S396(2), CFM95220Computation of a worldwide group’s basic interest allowance for a period is a stepping point in computing its interest allowance and thence interest capacity for the period. It does not take into account any interest allowance brought forward from earlier periods, or the de minimis amount. The amount depends on whether the fixed ratio method or group ratio method is applied.
Where the fixed ratio method applies, it is the lower of:
- 30% (the fixed ratio) of aggregate tax-EBITDA of the worldwide group; and
- the fixed ratio debt cap
Where the group ratio method applies, it is the lower of:
- the result of multiplying aggregate tax-EBITDA of the worldwide group by the group’s group ratio percentage; and
- the group ratio debt cap.
This is an election to apply the blended group ratio provisions. It is made in a worldwide group’s interest restriction return and can only be made where a group ratio election is in effect.
Blended group ratio provisions ...To continue reading
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