CFM96020 - Interest restriction: group-interest: qualifying net group-interest expense: overview
TIOPA10/S414
The qualifying net group-interest expense of a worldwide group for a period of account is used as the numerator to calculate the group ratio percentage of the group ratio method. It is also the absolute limit on the basic interest allowance through the operation of the group ratio debt cap as part of the group ratio method.
- The qualifying net group-interest expense is based on the adjusted net group-interest expense of the group for the period, decreased by downward adjustments. This is to exclude certain relevant expense amounts that would otherwise be included.
The qualifying net group-interest expense cannot be negative. Where the calculation produces a negative result, the qualifying net group-interest expense of the group for the period is nil.
Specific exclusions
The downward adjustments operate to exclude amounts in respect of a relevant expense amount that relates to:
- related party debt
- results-dependent securities
- equity notes
Elections
The calculation of qualifying net group-interest expense can be modified through the operation of the following elections:
- Alternative calculation
- Non-consolidated investment
- Consolidated partnerships