CFM98450 - Interest restriction: administration: reporting requirements: Statement of Calculations: TIOPA10/SCH7A/PARA21

TIOPA10/SCH7A/PARA21

The statement of calculations forms a part of a full interest restriction return for a period of account of a worldwide group, and draws together information from the group and its members that is taken into account in computing the group’s total disallowed amount (TIOPA10/S373(2)) or interest reactivation cap (S373(3)). The required elements are set out below, not in the order they appear in the legislation but, rather, in an order in which they might be collated and computed in preparing the calculations.

Not all of the items below will need to be included, according to whether the interest allowance is computed by the (default) fixed ratio method or an election is made to instead apply the group ratio method.

Where estimated figures have been used, this should be clearly stated.

The following items are to be included.

PARA21(a)

For each UK group company (a company that is a member of the group and within the charge to UK corporation tax (S492)),

(i) the company’s net tax-interest expense or net tax-interest income (S389) for the return period (S494) and

(ii) the company’s tax-EBITDA for the period (S406).

(iii) whether the company has made a qualifying infrastructure election under TIOPA10/S433 that is effective during the period of account (added by HMRC Notice published 25 August 2022 and effective from 1 October 2022)

PARA21(b)

The aggregate tax-interest income and aggregate tax-interest expense for the group (S390). These figures are derived by aggregating the net tax-interest expense or net tax-interest income of the UK group companies. One of these aggregate numbers will be zero. Note that if using commercial software to submit the return, the software will calculate this figure from the entries for the individual group companies.

PARA21(f)

The aggregate tax-EBITDA for the group (S405), being the sum of the tax-EBITDA amounts for the UK group companies.

PARA21(g)

The adjusted net group-interest expense (ANGIE) for the return period (S413), which is an accounting-based measure of the worldwide group’s external net interest and similar expense. From 1 October 2022, this is required regardless of whether the fixed or group ratio is used, following the publication of the HMRC Notice on 25 August 2022.

PARA21(h)

Where an election is made to compute the interest allowance for the return period by the group ratio method, the following three amounts:

  • PARA21(h)(ii): the qualifying net group-interest expense for the return period (QNGIE) (S414). This is an accounting-based measure of the entire worldwide group’s external net interest and similar expense, with more exclusions than the net group-interest expense (S410).
  • PARA21(h)(iii): the group-EBITDA, an accounting-based measure of EBITDA for the entire worldwide group (S401).
  • PARA21(h)(i): the group ratio percentage (S399), being the qualifying net group-interest expense (QNGIE) divided by group-EBITDA.

Where the group has also made a group ratio (blended) election under PARA14, the group ratio percentage should be adjusted as is required by S401 and the amount entered in respect of QNGIE should be the blended net group-interest expense as determined by S402.

PARA21(e)

Whether or not an election is made to apply the group ratio method, the interest allowance for the return period (S396).

PARA21(d)

The aggregate interest allowances of the group for earlier periods of account, so far as they are available in the return period (S393).

PARA21(c)

The interest capacity for the group for the return period (S392). This is the higher of:

(i) the sum of the interest allowance for the period and the amounts brought forward from earlier periods that are still available, or

(ii) the de minimis amount.

The interest allowance is computed by the fixed ratio method unless an election is made to apply the group ratio method.