CH82291 - Penalties for Inaccuracies: Calculating the penalty: Potential Lost Revenue Corporate Interest Restriction: Potential lost revenue

This guidance applies to returns which are relevant returns for a corporate interest restriction (CIR) period beginning on or after 1 April 2023.

For relevant returns for periods before this date, HMRC staff should seek advice from the specialist technical team, see CH910000.

Where a company is a member of a CIR group, and that company has received an enquiry into a company tax return, the group may be required to submit a revised interest restriction return (IRR) (see CFM98535).

As a result, it is possible that the total disallowed amount for the group could decrease, or that the total reactivated amount could increase.

When calculating the potential lost revenue (PLR) for individual group companies, there is a limit on how far reductions in CIR disallowances (or increased reactivations - see CH82292) are taken into account.

Where a company has a reduced CIR disallowance following a revised IRR, only the permitted reduction is taken into account in the PLR calculation.

A reduction is a “permitted reduction” if it has the effect of reducing the allocated disallowance of the company by no more than the relevant proportion.

To work out the “relevant proportion”, identify by what proportion the worldwide group’s total disallowed amount has been reduced in the revised IRR compared with the original IRR. For example, if the worldwide group’s total disallowance has reduced by 10%, the relevant proportion of the company’s reduced disallowance is 10%.

See CH82293 and CH82294 for examples.

If a group has not submitted an IRR for the relevant period, each company must disallow their pro-rata share of the total disallowed amount in their individual company tax returns. In this case, any reduction in the disallowed amount in the return of the company that was under enquiry is taken into account in calculating the PLR