(1) This Part contains provision that—
(a) disallows certain amounts that a company would (apart from this Part) be entitled to bring into account for the purposes of corporation tax in respect of interest and other financing costs, and
(b) allows certain amounts disallowed under this Part in previous accounting periods to be brought into account in later accounting periods.
(2) In this Chapter—
(a) section 373 defines some key concepts including, in particular, “the total disallowed amount” in relation to a period of account of a worldwide group, and
(b) section 374 provides for Schedule 7A to have effect.
(3) Chapter 2 provides for—
(a) the disallowance in certain circumstances of tax-interest expense amounts of companies that are members of a worldwide group, and
(b) the carrying forward of disallowed tax-interest expense amounts, and for bringing those amounts into account in certain circumstances in relation to a later period of account of the worldwide group.
(4) Chapter 3—
(a) defines “a tax-interest expense amount” and “a tax-interest income amount” of a company for a period of account of a worldwide group, which are amounts that are (or apart from this Part would be) brought into account for the purposes of corporation tax,
(b) defines “the net tax-interest expense” of a company for a period of account of a worldwide group, which is any excess of the company's tax-interest expense amounts for the period over its tax-interest income amounts for the period,
(c) defines “the net tax-interest income” of a company for a period of account of a worldwide group, which is any excess of the company's tax-interest income amounts for the period over its tax-interest expense amounts for the period, and
(d) defines “aggregate net tax-interest expense” and “aggregate net tax-interest income” of a worldwide group for a period of account of the worldwide group, which are made up of each member of the group's net tax-interest expense or net tax-interest income for the period.
(5) Chapter 4 contains provision about the calculation of “the interest capacity” of a worldwide group for a period of account of the group, which is the aggregate of the interest allowance for the period and any unused interest allowance of the group from the previous 5 years (or, if that aggregate is less than the de minimis amount, the de minimis amount).
(6) Chapter 5 makes provision about the calculation of “the interest allowance” of a worldwide group for a period of account of the group.
The interest allowance for a period of account is calculated using the fixed ratio method unless the group elects for the group ratio method to be used for the period.
(7) Chapter 6 defines concepts used in Chapter 5 including—
the “tax-EBITDA” of a company for a period of account of a worldwide group (which is an amount derived from amounts brought into account for the purposes of corporation tax);
the “aggregate tax-EBITDA” of a worldwide group for a period of account of the group (which is an amount derived from the tax-EBITDA of members of the group).
(8) Chapter 7 defines additional concepts used in Chapter 5 including—
“the net group-interest expense”, “the adjusted net group-interest expense” and “the qualifying net group-interest expense” of a worldwide group for a period of account of the group (which are amounts derived from the financial statements of the worldwide group);
the “group-EBITDA” of the worldwide group for a period of account of the group (which is an amount derived from the financial statements of the worldwide group).
(9) Chapter 8 contains provision altering the way in which this Part has effect in relation to the provision of public infrastructure assets or the carrying on of certain other related activities.
(10) Chapter 9 contains special provision altering the operation of certain provisions of this Part in relation to—
(a) particular types of company (for example, banking companies, companies carrying on oil-related activities, REITs or insurance companies), or
(b) particular types of transaction or accounting (for example, long funding operating leases or fair value accounting).
(11) Chapter 10 contains rules connected with tax avoidance.
(12) Chapter 11 contains the remaining interpretative and supplementary provision, including definitions of—
“related party”;
“a worldwide group”;
“ultimate parent”;
“period of account” of a worldwide group.
373 Meaning of “subject to interest restrictions”, “the total disallowed amount” etc
(1) A worldwide group is “subject to interest restrictions” in a period of account of the group if—
(a) the aggregate net tax-interest expense of the group for the period (see section 390), exceeds
(b) the interest capacity of the group for the period (see section 392).
(2) “The total disallowed amount” of a worldwide group in a period of account of the group is—
(a) if the group is subject to interest restrictions in the period, the amount of the excess mentioned in subsection (1);
(b) otherwise, nil.
(3) “The interest reactivation cap” of a worldwide group in a period of account of the group is (subject to subsection (4))—
(a) the interest allowance of the group for the period (see section 396), less
(b) the aggregate net tax-interest expense of the group for the period.
(4) If the amount determined under subsection (3) is a negative amount, the interest reactivation cap of the worldwide group in the period is nil.
(5) A worldwide group is “subject to interest reactivations” in a period of account of the group if—
(a) the interest reactivation cap of the group in the period is not nil, and
(b) at least one member of the group is within the charge to corporation tax at any time during the period, and has an amount available for reactivation in the return period that is not nil (see paragraph 26 of Schedule 7A).
(6) This section has effect for the purposes of this Part.
(1) Schedule 7A makes provision about—
(a) the preparation and submission of interest restriction returns by reporting companies of worldwide groups, and
(b) other related matters such as enquiries and information powers.
(2) Part 1 of that Schedule includes provision—
(a) for the appointment of a reporting company of a worldwide group for a period of account, but
(b) for companies (“non-consenting companies”) to elect to be unaffected by allocations of interest restrictions made by the company.
(3) Part 2 of that Schedule includes provision—
(a) for various elections to be made in an interest restriction return that are relevant to the operation of this Part (for example, the group ratio election),
(b) entitling the reporting company of a worldwide group to allocate interest restrictions among its members but with a rule that allocates a pro-rata share to a non-consenting company, and
(c) entitling the reporting company of a worldwide group to allocate interest reactivations among its members.
(4) The remaining Parts of that Schedule contain provision about—
(a) the keeping and preservation of records (see Part 3),
(b) enquiries into interest restriction returns (see Part 4),
(c) determinations made by officers of Revenue and Customs in the event of the breach of filing or other obligations (see Part 5),
(d) information powers exercisable by members of the group (see Part 6),
(e) information powers exercisable by officers of Revenue and Customs (see Part 7), and
(f) the amendment of company tax returns to reflect the effect of this Part of this Act and supplementary matters (see Parts 8 and 9).
375 Disallowance of deductions: full interest restriction return submitted
(1) This section applies where—
(a) an interest restriction return is submitted for a period of account of a worldwide group (“the relevant period of account”),
(b) the return complies with the requirements of paragraph 20(3) of Schedule 7A (requirements for full interest restriction return), and
(c) the return includes a statement that the group is subject to interest restrictions in the return period.
(2) A company that is listed on the statement under paragraph 22 of Schedule 7A (statement of allocated interest restrictions) must, in any accounting period for which the statement specifies an allocated disallowance, leave out of account tax-interest expense amounts that, in total, equal that allocated disallowance.
(3) A non-consenting company in relation to the return may—
(a) elect that subsection (2) is not to apply in relation to such relevant accounting period of the company as is specified in the election, or
(b) revoke an election previously made.
(4) If—
(a) an election under this section has effect in relation to an accounting period of a company, and
(b) paragraph 24 of Schedule 7A allocates to that period a pro-rata share of the total disallowed amount that is not nil,
the company must leave out of account in that period tax-interest expense amounts that, in total, equal that pro-rata share.
(5) See section 377 for provision as to which tax-interest expense amounts are to be left out of account as a result of this section.
376 Disallowance of deductions: no return, or non-compliant return, submitted
(1) This section applies where—
(a) a worldwide group is subject to interest restrictions in a period of account of the group (“the relevant period of account”),
(b) the relevant date has passed, and
(c) condition A, B or C is met.
(2) In this section “the relevant date” means—
(a) where the appointment of a reporting company has effect in relation to the relevant period of account, the filing date in relation to the period (see paragraph 7(5) of Schedule 7A);
(b) otherwise, the last day of the period of 12 months beginning with the end of the relevant period of account.
(3) Condition A is that no appointment of a reporting company has effect in relation to the relevant period of account.
(4) Condition B is that—
(a) the appointment of a reporting company has effect in relation to the relevant period of account, and
(b) no interest restriction return has been submitted for the period.
(5) Condition C is that—
(a) the appointment of a reporting company has effect in relation to the relevant period of account,
(b) an interest restriction return has been submitted for the period, and
(c) the return does not comply with the requirements of paragraph 20(3) of Schedule 7A (for example by including inaccurate figures).
(6) A relevant company must, in any accounting period to which paragraph 24 of Schedule 7A allocates a pro-rata share of the total disallowed amount that is not nil, leave out of account tax-interest expense amounts that, in total, equal that pro-rata share.
(7) See section 377 for provision as to which tax-interest expense amounts are to be left out of account as a result of this section.
(8) In this section “relevant company” means a company that was a member of the worldwide group at any time during the relevant period of account.
377 Disallowance of deductions: identification of the tax-interest amounts to be left out of account
(1) This section applies where—
(a) a company is required to leave tax-interest expense amounts out of account in an accounting period under section 375 or 376, and
(b) the total of the tax-interest expense amounts that, apart from that provision, would be brought into account in the accounting period exceeds the total of the tax-interest expense amounts that are required by that provision to be left out of account in that period.
(2) Tax-interest expense amounts must (subject to the following provisions of this section) be left out of account in the following order.
First, leave out of account tax-interest expense amounts that meet condition A in section 382 and would (if brought into account) be brought into account under Part 5 of CTA 2009 (non-trading debits in respect of loan relationships).
Second, leave out of account tax-interest expense amounts that meet condition B in section 382 and would (if brought into account) be brought into account under Part 5 of CTA 2009 as a result of section 574 of that Act (non-trading debits in respect of derivative contracts).
Third, leave out of account tax-interest expense amounts that meet condition A in section 382 and would (if brought into account) be brought into account under Part 3 of CTA 2009 as a result of section 297 of that Act (debits in respect of loan relationships treated as expenses of trade).
Fourth, leave out of account tax-interest expense amounts that meet condition B in section 382 and would (if brought into account) be brought into account under Part 3 of CTA 2009 as a result of section 573 of that Act (debits in respect of derivative contracts treated as expenses of trade).
Fifth, leave out of account tax-interest expense amounts that meet condition C in section 382 and do not also meet condition A or B in that section (finance leases, debt factoring and service concession arrangements).
(3) The company may—
(a) elect that subsection (2) is not to apply to the accounting period, or
(b) revoke an election previously made.
(4) An election under this section must specify the particular tax-interest expense amounts that are to be left out of account.
(1) For the purposes of this Part a tax-interest expense amount of a company is “disallowed” in an accounting period if the company is required to leave it out of account in that accounting period under section 375 or 376.
(2) A tax-interest expense amount of a company that is disallowed in an accounting period is (subject to the remaining provisions of this section) carried forward to subsequent accounting periods.
(3) Where—
(a) a tax-interest expense amount of a company would (apart from this Part) be brought into account in calculating the profits or losses of a trade carried on by the company in an accounting period,
(b) the tax-interest expense amount is disallowed in that accounting period, and
(c) in a subsequent accounting period (“the later accounting period”) the company ceases to carry on the trade, or the scale of the activities in the trade becomes small or negligible,
the tax-interest expense amount is not carried forward to ... accounting periods after the later accounting period.
(4) Where—
(a) a tax-interest expense amount of a company would (apart from this Part) be brought into account in calculating the profits or losses of a trade carried on by the company in an accounting period,
(b) the tax-interest expense amount is disallowed in that accounting period, and
(c) in a subsequent accounting period (“the later accounting period”) the trade is uncommercial and non-statutory,
the tax-interest expense amount is not carried forward to the later accounting period or accounting periods after the later accounting period.
(5) For the purposes of subsection (4), a trade is “uncommercial and non-statutory” in an accounting period if, were the company to have made a loss in the trade in the period, relief for the loss under section 37 of CTA 2010 (relief for trade losses against total profits) would have been unavailable by virtue of section 44 of that Act (trade must be commercial or carried on for statutory functions).
(6) Where—
(a) a tax-interest expense amount of a company would (apart from this Part) be brought into account in calculating the profits or losses of an investment business carried on by the company in an accounting period,
(b) the tax-interest expense amount is disallowed in that accounting period, and
(c) in a subsequent accounting period (“the later accounting period”) the company ceases to carry on the investment business, or the scale of the activities in the investment business becomes small or negligible,
the tax-interest expense amount is not carried forward to ... accounting periods after the later accounting period.
(7) Where a tax-interest expense amount—
(a) is disallowed in an accounting period,
(b) is carried forward to a subsequent accounting period (“the later accounting period”), and
(c) is brought into account in the later accounting period in accordance with section 379,
it is not carried forward to accounting periods after the later accounting period.
(1) This section applies where—
(a) an interest restriction return is submitted for a period of account of a worldwide group (“the relevant period of account”),
(b) the return complies with the requirements of paragraph 20(3) of Schedule 7A (requirements for full interest restriction return), and
(c) the return contains a statement that the group is subject to interest reactivations in the return period.
(2) A company that is listed on the statement under paragraph 25 of Schedule 7A (statement of allocated interest reactivations) must, in the specified accounting period, bring into account tax-interest expense amounts that—
(a) are brought forward to the specified accounting period from an earlier accounting period, and
(b) in total, equal the allocated reactivation for the return period.
(3) A tax-interest expense amount is brought into account in the specified accounting period under subsection (2) by being treated as a tax-interest expense amount of the specified accounting period (so that, for example, a tax-interest expense amount that is a relevant loan relationship debit falling within section 383(2)(a)(ii) is brought into account in the specified period as a non-trading debit under Part 5 of CTA 2009).
(4) See section 380 for provision as to which tax-interest expense amounts are to be brought into account under subsection (2).
(5) In this section “the specified accounting period” means—
(a) the earliest relevant accounting period of the company, or
(b) where the company became a member of the relevant worldwide group during the relevant period of account, the earliest relevant accounting period of the company in which it was a member of the group.
380 Reactivation of deductions: identification of the tax-interest amounts to be brought into account
(1) This section applies where—
(a) a company is required to bring tax-interest expense amounts into account in an accounting period under section 379, and
(b) the total of the tax-interest expense amounts that are brought forward to the accounting period from earlier accounting periods exceeds the total of the tax-interest expense amounts that are required by that provision to be brought into account in that accounting period.
(2) Tax-interest expense amounts must (subject to the following provisions of this section) be brought into account in the following order.
First, bring into account tax-interest expense amounts that meet condition A in section 382 and are brought into account under Part 5 of CTA 2009 (non-trading debits in respect of loan relationships).
Second, bring into account tax-interest expense amounts that meet condition B in section 382 and are brought into account under Part 5 of CTA 2009 as a result of section 574 of that Act (non-trading debits in respect of derivative contracts).
Third, bring into account tax-interest expense amounts that meet condition A in section 382 and are brought into account under Part 3 of CTA 2009 as a result of section 297 of that Act (debits in respect of loan relationships treated as expenses of trade).
Fourth, bring into account tax-interest expense amounts that meet condition B in section 382 and are brought into account under Part 3 of CTA 2009 as a result of section 573 of that Act (debits in respect of derivative contracts treated as expenses of trade).
Fifth, bring into account tax-interest expense amounts that meet condition C in section 382 and do not also meet condition A or B in that section (finance leases, debt factoring and service concession arrangements).
(3) The company may—
(a) elect that subsection (2) is not to apply to the accounting period, or
(b) revoke an election previously made.
(4) An election under this section must specify the particular tax-interest expense amounts that are to be brought into account.
381 Set-off of disallowances and reactivations in the same accounting period
(1) This section applies where, as a result of the operation of this Part in relation to different periods of account (whether of the same or a different worldwide group), a company would, apart from this section—
(a) be required to leave out of account one or more tax-interest expense amounts in an accounting period under section 375 or 376, and
(b) be required to bring one or more tax-interest expense amounts into account in that accounting period under section 379.
(2) In this section—
(a) “the gross disallowed amount” means the amount, or total of the amounts, mentioned in subsection (1)(a);
(b) “the gross reactivated amount” means the amount, or total of the amounts, mentioned in subsection (1)(b).
(3) Where the gross disallowed amount is equal to the gross reactivated amount, no tax-interest expense amounts are to be left out of account in the accounting period under this Part or brought into account in the accounting period under this Part.
(4) Where the gross disallowed amount is more than the gross reactivated amount—
(a) the requirement in section 375 or 376 is to leave out of account tax-interest expense amounts that, in total, equal the gross disallowed amount less the gross reactivated amount, and
(b) no amount is to be brought into account in the accounting period under section 379.
(5) Where the gross reactivated amount is more than the gross disallowed amount—
(a) no amount to be left out of account in the accounting period under section 375 or 376, and
(b) the requirement in section 379 is to bring into account the gross reactivated amount less the gross disallowed amount.
(1) References in this Part to a “tax-interest expense amount” of a company for a period of account of a worldwide group are to any amount that—
(a) is (or apart from this Part would be) brought into account for the purposes of corporation tax in a relevant accounting period of the company, and
(b) meets condition A, B or C.
(1A) But, in the case of a company which is a charity (as defined in paragraph 1 of Schedule 6 to FA 2010) at the end of the period of account, references in this Part to a “tax-interest expense amount” of the company do not include references to an amount which meets Condition A, B or C.
(2) Condition A is that the amount is a relevant loan relationship debit (see section 383).
(3) Condition B is that the amount is a relevant derivative contract debit (see section 384).
(4) Condition C is that the amount is in respect of the financing cost implicit in amounts payable under a relevant arrangement or transaction.
(5) In subsection (4) “relevant arrangement or transaction” means—
(a) a finance lease,
(b) debt factoring, or any similar transaction, or
(c) a service concession arrangement if and to the extent that the arrangement is accounted for as a financial liability.
(6) Subsection (8) applies if an accounting period in which a tax-interest expense amount is (or apart from this Part would be) brought into account for the purposes of corporation tax contains one or more disregarded periods.
(7) A “disregarded period” is any period falling within the accounting period—
(a) which does not fall within the period of account of the worldwide group, or
(b) throughout which the company is not a member of the group.
(8) Where this subsection applies, the tax-interest expense amount mentioned in subsection (6) is reduced by such amount as is referable, on a just and reasonable basis, to the disregarded period or periods mentioned in that subsection.
(9) An amount may be reduced to nil under subsection (8).
(10) If—
(a) an amount would have met condition A, B or C but for the application of a rule preventing its deduction,
(b) some or all of it is deductible at a subsequent time as a result of the application of another rule, and
(c) none of conditions A to C are met at that time,
so much of the amount as is subsequently deductible is treated, at that time, as meeting whichever of condition A, B or C would have been met but for the application of the rule mentioned in paragraph (a).
(11) An example of a case to which subsection (10) applies is a case where—
(a) an amount is prevented from being deducted as a result of any provision made by Part 6A (hybrid and other mismatches), and
(b) another provision of that Part subsequently applies so as to permit some or all of it to be deducted from total profits.
(1) This section applies for the purposes of section 382.
(2) An amount is a “relevant loan relationship debit” if—
(a) it is a debit that is (or apart from this Part would be) brought into account for the purposes of corporation tax in respect of a loan relationship under—
(i) Part 3 of CTA 2009 as a result of section 297 of that Act (loan relationships for purposes of trade), or
(ii) Part 5 of that Act (other loan relationships), and
(b) is not an excluded debit.
(3) A debit is “excluded” for the purposes of subsection (2)(b) if—
(a) it is in respect of an exchange loss (within the meaning of Parts 5 and 6 of CTA 2009), or
(b) it is in respect of an impairment loss.
(1) This section applies for the purposes of section 382.
(2) An amount is a “relevant derivative contract debit” if—
(a) it is a debit that is (or apart from this Part would be) brought into account for the purposes of corporation tax in respect of a derivative contract under—
(i) Part 3 of CTA 2009 as a result of section 573 of that Act (derivative contracts for purposes of trade), or
(ii) Part 5 of that Act as a result of section 574 of that Act (other derivative contracts),
(b) it is not an excluded debit, and
(c) the condition in subsection (4) is met.
(3) A debit is “excluded” for the purposes of subsection (2)(b) if—
(a) it is in respect of an exchange loss (within the meaning of Part 7 of CTA 2009),
(b) it is in respect of an impairment loss, or
(c) it is in respect of a risk arising in the ordinary course of a trade (other than a risk arising in the ordinary course of a financial trade) where the derivative contract was entered into wholly for reasons unrelated to the capital structure of the worldwide group (or any member of the worldwide group).
(3A) For the purposes of subsection (3)(c) a debit is in respect of a risk arising in the ordinary course of “a financial trade” only so far as the risk relates to an amount which is or is likely to be—
(a) a tax-interest expense amount, or
(b) a tax-interest income amount,
of the company in any relevant accounting period.
(4) The condition referred to in subsection (2)(c) is that the underlying subject matter of the derivative contract consists only of one or more of the following—
(a) interest rates;
(b) any index determined by reference to income or retail prices;
(c) currency;
(d) an asset or liability representing a loan relationship;
(e) any other underlying subject matter which is—
(i) subordinate in relation to any of the matters mentioned in paragraphs (a) to (d), or
(ii) of small value in comparison with the value of the underlying subject matter as a whole.
(5) For the purposes of this section, whether part of the underlying subject matter of the derivative contract is subordinate or of small value is to be determined by reference to the time when the company enters into or acquires the contract.
(6) In this section “underlying subject matter” has the same meaning as in Part 7 of CTA 2009.
(1) References in this Part to a “tax-interest income amount” of a company for a period of account of a worldwide group are to any amount that—
(a) is (or apart from this Part would be) brought into account for the purposes of corporation tax in a relevant accounting period of the company, and
(b) meets condition A, B, C or D.
(2) Condition A is that the amount is a relevant loan relationship credit (see section 386).
(3) Condition B is that the amount is a relevant derivative contract credit (see section 387).
(4) Condition C is that the amount is in respect of the financing income implicit in amounts receivable under a relevant arrangement or transaction.
(5) In subsection (4) “relevant arrangement or transaction” means—
(a) a finance lease,
(b) debt factoring, or any similar transaction, or
(c) a service concession arrangement if and to the extent that the arrangement is accounted for as a financial asset.
(6) Condition D is that the amount is in respect of income that—
(a) is receivable from another company, and
(b) is in consideration of the provision of a guarantee of any borrowing of that other company.
(7) Subsection (9) applies if an accounting period in which a tax-interest income amount is (or apart from this Part would be) brought into account for the purposes of corporation tax contains one or more disregarded periods.
(8) A “disregarded period” is any period falling within the accounting period—
(a) which does not fall within the period of account of the worldwide group, or
(b) throughout which the company is not a member of the group.
(9) Where this subsection applies, the tax-interest income amount mentioned in subsection (7) is reduced by such amount as is referable, on a just and reasonable basis, to the disregarded period or periods mentioned in that subsection.
(10) An amount may be reduced to nil under subsection (9).
(1) This section applies for the purposes of section 385.
(2) An amount is a “relevant loan relationship credit” if—
(a) it is a credit that is (or apart from this Part would be) brought into account for the purposes of corporation tax in respect of a loan relationship under—
(i) Part 3 of CTA 2009 as a result of section 297 of that Act (loan relationships for purposes of trade), or
(ii) Part 5 of that Act (other loan relationships), and
(b) it is not an excluded credit.
(3) A credit is “excluded” for the purposes of subsection (2)(b) if—
(a) it is in respect of an exchange gain (within the meaning of Parts 5 and 6 of CTA 2009), or
(b) it is in respect of the reversal of an impairment loss.
(1) This section applies for the purposes of section 385.
(2) An amount is a “relevant derivative contract credit” if—
(a) it is a credit that is (or apart from this Part would be) brought into account for the purposes of corporation tax in respect of a derivative contract under—
(i) Part 3 of CTA 2009 as a result of section 573 of that Act (derivative contracts for purposes of trade), or
(ii) Part 5 of that Act as a result of section 574 of that Act (other derivative contracts),
(b) is not an excluded credit, and
(c) the condition in subsection (4) is met.
(3) A credit is “excluded” for the purposes of subsection (2)(b) if—
(a) it is in respect of an exchange gain (within the meaning of Part 7 of CTA 2009),
(b) it is in respect of the reversal of an impairment loss, or
(c) it is in respect of a risk arising in the ordinary course of a trade (other than a risk arising in the ordinary course of a financial trade) where the derivative contract was entered into wholly for reasons unrelated to the capital structure of the worldwide group (or any member of the worldwide group).
(3A) For the purposes of subsection (3)(c) a credit is in respect of a risk arising in the ordinary course of “a financial trade” only so far as the risk relates to an amount which is or is likely to be—
(a) a tax-interest expense amount, or
(b) a tax-interest income amount,
of the company in any relevant accounting period.
(4) The condition referred to in subsection (2)(c) is that the underlying subject matter of the derivative contract consists only of one or more of the following—
(a) interest rates;
(b) any index determined by reference to income or retail prices;
(c) currency;
(d) an asset or liability representing a loan relationship;
(e) any other underlying subject matter which is—
(i) subordinate in relation to any of the matters mentioned in paragraphs (a) to (d), or
(ii) of small value in comparison with the value of the underlying subject matter as a whole.
(5) For the purposes of this section, whether part of the underlying subject matter of the derivative contract is subordinate or of small value is to be determined by reference to the time when the company enters into or acquires the contract.
(6) In this section “underlying subject matter” has the same meaning as in Part 7 of CTA 2009.
(1) This section applies where—
(a) apart from this section, an amount (“the relevant amount”) would be a tax-interest income amount brought into account for the purposes of corporation tax in a relevant accounting period (“the relevant accounting period”) of a company, and
(b) the amount of corporation tax chargeable in respect of the relevant amount is reduced under section 18(2) (entitlement to credit for foreign tax reduces UK tax by amount of the credit).
(2) The relevant amount is not a tax-interest income amount to the extent that it consists of notional untaxed income.
(3) For this purpose, the amount of the relevant amount that consists of “notional untaxed income” is—
A B
where—
A is the amount of the reduction mentioned in subsection (1)(b);
B is the rate of corporation tax payable by the company, before any credit under Part 2 (double taxation relief), on the company's profits for the relevant accounting period.
389 The “net tax-interest expense” or “net tax-interest income” of a company
(1) A company has “net tax-interest expense” for a period of account of a worldwide group if the total of its tax-interest expense amounts for the period exceeds the total of its tax-interest income amounts for the period.
(2) The amount of the net tax-interest expense of the company for the period is the amount of the excess.
(3) A company has “net tax-interest income” for a period of account of a worldwide group if the total of its tax-interest income amounts for the period exceeds the total of its tax-interest expense amounts for the period.
(4) The amount of the net tax-interest income of the company for the period is the amount of the excess.
(5) The net tax-interest expense or net tax-interest income of a company for a period of account of a worldwide group is “referable” to an accounting period of the company to the extent that it comprises tax-interest expense amounts or tax-interest income amounts that are (or apart from this Part would be) brought into account in the accounting period.
(6) This section applies for the purposes of this Part.
390 The worldwide group's aggregate net tax-interest expense and income
(1) The “aggregate net tax-interest expense” of a worldwide group for a period of account of the group is (subject to subsection (2))—
(a) the total of the net tax-interest expense for the period of each relevant company that has such an amount, less
(b) the total of the net tax-interest income for the period of each relevant company that has such an amount.
(2) Where the amount determined under subsection (1) is negative, the “aggregate net tax-interest expense” of the group for the period is nil.
(3) The “aggregate net tax-interest income” of a worldwide group for a period of account of the group is (subject to subsection (4))—
(a) the total of the net tax-interest income for the period of each relevant company that has such an amount, less
(b) the total of the net tax-interest expense for the period of each relevant company that has such an amount.
(4) Where the amount determined under subsection (3) is negative, the “aggregate net tax-interest income” of the group for the period is nil.
(5) In this section “relevant company” means a company that was a member of the group at any time during the period of account of the group.
(6) This section applies for the purposes of this Part.
(1) In this Part “impairment loss” means a loss in respect of the impairment of a financial asset.
(2) A reference to a debit in respect of an impairment loss does not include a debit that is (or apart from this Part would be) brought into account in an accounting period in respect of an asset for which fair value accounting is used.
391A Amounts capitalised in carrying value of intangible fixed assets
In determining for the purposes of this Part whether an amount is a tax-interest expense amount or tax-interest income amount, section 906(1) of CTA 2009 (priority of intangible fixed asset rules) does not apply in respect of any matter which may be brought into account in accordance with Part 5 or 7 of that Act.
392 The interest capacity of a worldwide group for a period of account
(1) For the purposes of this Part “the interest capacity” of a worldwide group for a period of account of the group (“the current period”) is (subject to subsection (2))—
A + B
where—
A is the interest allowance of the group for the current period (see Chapter 5);
B is the aggregate of the interest allowances of the group for periods before the current period so far as they are available in the current period (see section 393).
(2) Where the amount determined under subsection (1) is less than the de minimis amount for the current period, the interest capacity of the worldwide group for the period is the de minimis amount.
(3) For this purpose “the de minimis amount” for a period of account is—
(a) £2 million, or
(b) where the period is more than or less than a year, the amount mentioned in paragraph (a) proportionately increased or reduced.
393 Amount of interest allowance for a period that is “available” in a later period
(1) This section applies for the purposes of this Chapter.
(2) The amount of the interest allowance of a worldwide group for a period of account (“the originating period”) that is “available” in a later period of account of the group (“the receiving period”) is (subject to subsection (5)) the lower of amounts A and B.
(3) Amount A is—
(a) the amount of the interest allowance for the originating period, less
(b) the total of the amount or amounts (if any) of that interest allowance that were used in the originating period, or in any subsequent period of account of the group before the receiving period (see section 394).
(4) Amount B is the amount (if any) of the interest allowance for the originating period that is unexpired in the receiving period (see section 395).
(5) The amount of the interest allowance for the originating period that is “available” in the receiving period is nil if—
(a) an abbreviated return election has effect in relation to the originating period, the receiving period or any intervening period of account of the group, or
(b) an interest restriction return is not submitted for any such period.
(1) This section applies for the purposes of this Chapter.
(2) The amount of the interest allowance of a worldwide group for a period of account of the group (“the originating period”) that is “used” in the originating period is the lower of—
(a) the interest allowance for the originating period, and
(b) the sum of—
(i) the aggregate net tax-interest expense of the group for the originating period;
(ii) the total amount of tax-interest expense amounts required to be brought into account in the originating period under section 379 (reactivation of interest) by members of the group.
(3) The amount of the interest allowance for the originating period that is “used” in a later period of account of the group (“the receiving period”) is the lower of—
(a) the interest allowance so far as it is available in the receiving period (see section 393), and
(b) the relevant part of the aggregate net tax-interest expense of the group for the receiving period (see subsection (4)).
(4) In subsection (3)(b) “the relevant part of the aggregate net tax-interest expense of the group for the receiving period” is (subject to subsection (5))—
A − B − C
where—
A is the aggregate net tax-interest expense of the group for the receiving period;
B is the interest allowance of the group for the receiving period;
C is the amount of the interest allowance of the group for any period before the originating period that is used in the receiving period.
(5) Where the amount determined under subsection (4) is negative, “the relevant part of the aggregate net tax-interest expense of the group for the receiving period” is nil.
395 Amount of interest allowance for a period of account that is “unexpired” in later period
(1) This section contains provision for determining for the purposes of this Chapter the extent to which an interest allowance of a worldwide group for a period of account (“the originating period”) is “unexpired” in a later period of account of the group (“the receiving period”).
(2) If the receiving period—
(a) begins 5 years or less after the originating period begins, and
(b) ends 5 years or less after the originating period ends,
all of the interest allowance for the originating period is unexpired in the receiving period.
(3) If the receiving period begins 5 years or more after the originating period ends, none of the interest allowance for the originating period is unexpired in the receiving period.
(4) Subsection (5) applies if the receiving period—
(a) begins more than 5 years after the originating period begins, and
(b) ends 5 years or less after the originating period ends.
(5) The amount of the interest allowance for the originating period that is unexpired in the receiving period is—
( A − B ) × X Y
where—
A is the interest allowance for the originating period;
B is—
the aggregate net tax-interest expense of the group for the originating period, or
if lower, the interest allowance for the originating period;
X is the number of days in the period—
beginning with the day on which the receiving period begins, and
ending with the day 5 years after the day on which the originating period ends;
Y is the number of days in the originating period.
(6) Subsection (7) applies if the receiving period—
(a) begins 5 years or less after the originating period begins, and
(b) ends more than 5 years after the originating period ends.
(7) The amount of the interest allowance for the originating period that is unexpired in the receiving period is—
( C − D ) × X Z
where—
C is the aggregate net tax-interest expense of the group for the receiving period;
D is—
the interest allowance of the group for the receiving period, or
if lower, the aggregate net tax-interest expense of the group for the receiving period;
X has the same meaning as in subsection (5);
Z is the number of days in the receiving period.
(8) Subsection (9) applies if—
(a) the receiving period—
(i) begins more than 5 years after the originating period begins, and
(ii) ends more than 5 years after the originating period ends, and
(b) subsection (3) does not apply.
(9) The amount of the interest allowance for the originating period that is unexpired in the receiving period is the lower of the amounts determined under subsections (5) and (7).
395A Carry forward of interest allowance: new holding company
(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) For the purposes of this Chapter and Chapter 5—
(a) so far as it would not otherwise be the case—
(i) the first period of account of the new group is treated as beginning with the day on which the qualifying takeover occurs (the “takeover day”), and
(ii) the last period of account of the old group is treated as ending on the day before the takeover day;
(b) the interest allowance of the new group is determined as if periods of account of the old group which ended before the beginning of the first period of account of the new group were periods of account of the new group.
396 The interest allowance of a worldwide group for a period of account
(1) For the purposes of this Part “the interest allowance” of a worldwide group for a period of account of the group is—
A + B
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
(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
(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”.
(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—
A B
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”.
(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))—
A − B
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))—
A − B
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”.
400A Carry forward of excess debt cap: new holding company
(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 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 ending on the day before the takeover day (see section 395A(3)).
401 Effect of group ratio (blended) election on group ratio percentage
(1) Where a group ratio (blended) election (see paragraph 14 of Schedule 7A) has effect in relation to a period of account of a worldwide group (“the relevant period of account”), this Chapter applies subject to this section.
(2) Section 399 (meaning of “group ratio percentage”) does not apply for the purpose of determining the group ratio percentage of the group for the relevant period of account.
(3) Instead, the group ratio percentage of the group for the relevant period of account is determined by taking the following steps—
Step 1 For each investor in the group, multiply the investor's applicable percentage by the investor's share in the group.
Step 2 Add together the amounts found under Step 1.
(4) For the purposes of this section, an investor's “applicable percentage” is the highest of the following percentages—
(a) 30%;
(b) the percentage determined under section 399;
(c) in the case of a related party investor that, throughout the relevant period of account, is a member of a worldwide group (“the investor's worldwide group”) other than that mentioned in subsection (1), the group ratio percentage of the investor's worldwide group for the relevant period of account.
(5) Subsection (6) applies where financial statements of the investor's worldwide group are drawn up in respect of one or more periods (“the investor's periods of account”) that are comprised in or overlap with (but are not coterminous with) the relevant period of account.
(6) The group ratio percentage of the investor's worldwide group for the relevant period of account is to be determined for the purposes of subsection (4)(c) by taking the following steps—
Step 1 Find the group ratio percentage of the investor's worldwide group for each of the investor's periods of account.
Step 2 Find the proportion of the relevant period of account that coincides with each of the investor's periods of account.
Step 3 For each of the investor's periods of account, multiply the group ratio percentage found under Step 1 by the proportion found under Step 2.
Step 4 Add together the amounts found under Step 3.
402 Effect of group ratio (blended) election on group ratio debt cap
(1) Where a group ratio (blended) election (see paragraph 14 of Schedule 7A) has effect in relation to a period of account of a worldwide group (“the relevant period of account”), this Chapter applies subject to this section.
(2) In section 400 (the debt cap), subsection (2)(a) is treated as if—
(a) it did not refer to the qualifying net group-interest expense of the group for the period, and
(b) instead it referred to the blended net group-interest expense of the group for the period, as determined in accordance with this section.
(3) The blended net group-interest expense of the group for the relevant period of account is determined by taking the following steps—
Step 1 For each investor in the group whose applicable percentage for the purposes of section 401 is the percentage mentioned in subsection (4)(a) of that section, multiply the adjusted net group-interest expense of the group for the period by the investor's share in the group.
Step 2 For each investor in the group whose applicable percentage for the purposes of section 401 is the percentage mentioned in subsection (4)(b) of that section, multiply the qualifying net group-interest expense of the group for the period by the investor's share in the group.
Step 3 For each investor in the group whose applicable percentage for the purposes of section 401 is the percentage mentioned in subsection (4)(c) of that section, find the applicable net group-interest expense of the investor's worldwide group for the period (see subsections (4) to (8) of this section).
Step 4 Add together the amounts found under Steps 1, 2 and 3.
(4) For the purposes of this section, the “applicable net group-interest expense” of the investor's worldwide group for a period of account is so much of the qualifying net group-interest expense of the investor's worldwide group for the period as relates to loans to, or other financial arrangements with, members of the investor's worldwide group that are used to fund (directly or indirectly) loans to, or other financial arrangements with, members of the worldwide group mentioned in subsection (1).
(5) Subsection (6) applies where periods of account of the investor's worldwide group (“the investor's periods of account”) are comprised in or overlap with (but are not coterminous with) the relevant period of account.
(6) The applicable net group-interest expense of the investor's worldwide group for the relevant period of account is the aggregate of so much of the applicable net group-interest expense of the investor's worldwide group for each of the investor's periods of account as is referable, on a just and reasonable basis, to the relevant period of account.
(7) Subsection (8) applies where—
(a) a loan is made to, or another financial arrangement is entered into with, a member of the investor's worldwide group, and
(b) the loan or other financial arrangement is—
(i) in part used to fund (directly or indirectly) loans to, or other financial arrangements with, members of the worldwide group mentioned in subsection (1), and
(ii) in part used for other purposes.
(8) In determining the applicable net group-interest expense of the investor's worldwide group for any period, the amount of the qualifying net group-interest expense of the investor's worldwide group for the period that is brought into account, in respect of the loan or other financial arrangement mentioned in subsection (7)(a), is confined to such amount as is referable, on a just and reasonable basis, to the use mentioned in subsection (7)(b)(i).
(9) In this section—
“financial arrangements” does not include the holding of shares;
“the investor's worldwide group” has the same meaning as in section 401.
403 Calculations under sections 401 and 402: investor worldwide groups
(1) This section applies—
(a) in determining, under section 401, the group ratio percentage of the investor's worldwide group for a period of account;
(b) in determining, under section 402, the qualifying net group-interest expense of the investor's worldwide group for a period of account.
(2) Where the group ratio (blended) election specifies that a particular election under Schedule 7A (“the investor's election”) is to be treated as having effect, or as not having effect, in relation to periods of account of the investor's worldwide group, the investor's election is to be so treated in determining the amounts mentioned in subsection (1).
(3) Where the group ratio (blended) election does not specify that a particular election under Schedule 7A (“the investor's election”) is to be treated as having effect, or as not having effect, in relation to periods of account of the investor's worldwide group, the investor's election is to be treated as having effect in determining the amounts mentioned in subsection (1) only if it was in fact made in relation to the period of account in question by a reporting company of the investor's worldwide group.
(4) In this section “the investor's worldwide group” has the same meaning as in section 401.
404 Meaning of “investor”, “related party investor” and investor's “share”
(1) An entity is an “investor” in a worldwide group if it has an interest in the ultimate parent of the group that entitles it to a proportion of the profits or losses of the group.
(2) An investor in a worldwide group is a “related party investor” of the group in relation to a period of account of the group if, throughout the period, it is a related party of the ultimate parent of the group.
(3) The “share” of an investor in a worldwide group, in relation to a period of account of the group, is the proportion (expressed as a percentage) of the profits or losses of the group that arise in the period to which the investor is entitled by virtue of the investor's interest in the group's ultimate parent.
(4) This section has effect for the purposes of this Part.
For the purposes of this Part “the aggregate tax-EBITDA” of a worldwide group for a period of account of the group is—
(a) the total of the tax-EBITDAs for the period of each company that was a member of the group at any time during the period, or
(b) where the amount specified in paragraph (a) is negative, nil.
(1) For the purposes of this Part the “tax-EBITDA” of a company for a period of account of the worldwide group is—
(a) where the company has only one relevant accounting period, the company's adjusted corporation tax earnings for that accounting period;
(b) where the company has more than one relevant accounting period, the total of the company's adjusted corporation tax earnings for each of those accounting periods.
(2) The company's “adjusted corporation tax earnings” for an accounting period is the total (which may be negative) of the amounts that meet condition A or B.
(3) Condition A is that the amount—
(a) is brought into account by the company in determining its taxable total profits of the period (within the meaning given by section 4(2) of CTA 2010), and
(b) is not an excluded amount for the purposes of this condition (see section 407).
(4) Condition B is that the amount—
(a) is not brought into account as mentioned in subsection (3)(a), but would have been so brought into account if the company had made profits, or more profits, of any description in the period, and
(b) is not an excluded amount for the purposes of this condition (see section 407).
(5) Subsection (7) applies if an amount—
(a) is brought into account as mentioned in subsection (3)(a), or
(b) is not brought into account as mentioned in subsection (4)(a),
in an accounting period which contains one or more disregarded periods.
(6) A “disregarded period” is any period falling within the accounting period—
(a) which does not fall within the period of account of the worldwide group, or
(b) throughout which the company is not a member of the group.
(7) Where this subsection applies, the amount mentioned in subsection (5) is reduced, for the purposes of subsection (2), by such amount (if any) as is referable, on a just and reasonable basis, to the disregarded period or periods mentioned in subsection (5).
(8) An amount may be reduced to nil under subsection (7).
407 Amounts not brought into account in determining a company's tax-EBITDA
(1) An amount is an excluded amount for the purposes of conditions A and B in section 406 if it is any of the following—
(a) a tax-interest expense amount or a tax-interest income amount (or an amount which would, apart from section 388, be a tax-interest income amount);
(b) an allowance or charge under CAA 2001 or capital expenditure for which a deduction is given under a relevant enactment;
(c) an excluded relevant intangibles debit or an excluded relevant intangibles credit (see section 408);
(d) a loss that—
(i) is made by the company in an accounting period other than that mentioned in section 406(2), and
(ii) is not an allowable loss for the purposes of TCGA 1992;
(e) a deficit from the company's loan relationships for an accounting period other than that mentioned in section 406(2);
(f) expenses of management of the company that are referable to an accounting period other than that mentioned in section 406(2);
(g) a deduction under section 137 of CTA 2010 (group relief) or section 188CK of that Act (group relief for carried-forward losses) if and to the extent that it constitutes a loss of the worldwide group;
(ga) a reduction under paragraph 37(3)(b) of Schedule 5 to FA 2019 (non-UK resident companies carrying on UK property businesses etc: unrelieved amounts);
(h) a qualifying tax relief.
(1A) For the purposes of subsection (1)(b) “relevant enactment” means—
(a) section 86A of CTA 2009 (contributions to flood and coastal erosion risk management projects);
(b) section 142 of CTA 2009 (waste disposal site preparation expenditure);
(c) section 145 of CTA 2009 (waste disposal site restoration payments);
(d) section 147 of CTA 2009 (cemeteries and crematoria).
(2) For the purposes of subsection (1)(g) the deduction constitutes a “loss of the worldwide group” if and to the extent that it comprises surrenderable amounts that are referable to times at which the surrendering company was a member of the worldwide group.
(3) An amount is a qualifying tax relief for the purposes of subsection (1)(h) if it is any of the following—
(a) an R&D expenditure credit under Chapter 1A of Part 13 of CTA 2009;
(b) a deduction under section 1044, 1063, 1068 or 1087 of CTA 2009 (additional relief for expenditure on research and development);
(c) an amount which is treated as a trading loss as a result of section 1092 of CTA 2009 (SMEs: deemed trading loss for pre-trading expenditure);
(d) a deduction under section 1147 or 1149 of CTA 2009 (relief for expenditure on contaminated or derelict land);
(e) a deduction under section 1199 of CTA 2009 (film tax relief);
(f) a deduction under section 1216CF of CTA 2009 (television tax relief);
(g) a deduction under section 1217CF of CTA 2009 (video games tax relief);
(h) a deduction under section 1217H of CTA 2009 (relief in relation to theatrical productions);
(i) a deduction under section 1217RD of CTA 2009 (orchestra tax relief);
(j) a deduction under section 1218ZCE of CTA 2009 (museums and galleries exhibition tax relief);
(k) a qualifying charitable donation (whether made in the accounting period mentioned in section 406(2) or an earlier one);
(l) a deduction under section 357A of CTA 2010 (profits from patents etc chargeable at lower rate of corporation tax).
(4) An amount is an excluded amount for the purposes of condition B in section 406 if it is an allowable loss for the purposes of TCGA 1992.
408 Excluded relevant intangibles debits and excluded relevant intangibles credits
(1) For the purposes of section 407 (and this section)—
(a) a debit is a “relevant intangibles debit” if it is brought into account under a provision of Part 8 of CTA 2009 (intangible fixed assets) that is listed in column 1 of the following table;
(b) a relevant intangibles debit is “excluded” to the extent indicated in the corresponding entry in column 2 of the table.
Provision | Excluded debits
section 729 | excluded in full
section 731 | excluded in full
section 732 | excluded if and to the extent that its amount is determined by reference to an excluded intangibles credit
section 735 | excluded in full
section 736 | excluded in full
section 872 | excluded in full
section 874 | excluded in full
(2) For the purposes of section 407 (and this section)—
(a) a credit is a “relevant intangibles credit” if it is brought into account under a provision of Part 8 of CTA 2009 (intangible fixed assets) that is listed in column 1 of the following table;
(b) a relevant intangibles credit is “excluded” to the extent indicated in the corresponding entry in column 2 of the table.
Provision | Excluded credits
section 723 | excluded if and to the extent that its amount is determined by reference to excluded intangible debits and excluded intangible credits
section 725 | excluded if and to the extent that its amount is determined by reference to an excluded intangibles debit
section 735 | excluded if and to the extent that the cost of the asset in question exceeds its tax written-down value
section 872 | excluded in full
section 874 | excluded in full
(3) In the table in subsection (2)—
(a) “tax written-down value” has the same meaning as in Part 8 of CTA 2009 (see Chapter 5 of that Part);
(b) “the cost of the asset” has the same meaning as in section 736 of that Act.