CFM95905 - Interest restriction: group-interest: overview
TIOPA10/S410-S415
The Corporate Interest Restriction uses three concepts of group-interest for particular aspects of the rules:
- Net group-interest expense is the total of the amounts of interest and other financing amounts recognised in the worldwide group’s financial statements as an item of profit or loss. This amount is added back to the group’s profit before tax as part of the calculation of group-EBITDA.
- Adjusted net group-interest expense takes the amount of net total group-interest and makes certain adjustments to this to provide a more refined measure of group-interest for the period. This is the absolute limit that is used for the fixed ratio debt cap as part of the fixed ratio method.
- Qualifying net group-interest expense restricts the adjusted net group-interest by excluding certain amounts. This is used in the numerator in the calculation of the group ratio percentage as part of the group ratio method. It is also the absolute limit that is used for the group ratio debt cap as part of the group ratio method.
Derivatives
In calculating the group-interest amounts, fair value movements on derivative contracts that have a hedging function are ‘disregarded’ through the application of the Disregard Regulations.
Elections
The calculation of the group-interest amounts can be modified through the operation of the following elections:
- Alternative calculation
- Non-consolidated investment
- Consolidated partnerships