CFM90150 - Debt cap: overview: legislation

This guidance applies to worldwide group periods of account ending before or straddling 1 April 2017.

Structure of legislation dealing with the debt cap rules

The rules for the debt cap are contained within TIOPA2010/Part7 and various Regulations.

Part 7 is structured as follows

  • Chapter 1 introduces the debt cap rules.
  • Chapter 2 contains the gateway test and the rules dealing with the financial services exclusion.
  • Chapter 3 explains how the total disallowed amount is calculated and how it is allocated among the relevant group companies of a group.
  • Chapter 4 provides the rules that determine particular amounts of finance income receivable by the UK group companies of a group that can be exempt from corporation tax when there has a been a disallowance under Chapter 3.
  • Chapter 5 contains rules that exempt certain intra-group finance income from corporation tax where the paying company is resident in the European Economic Area (apart from the UK) and that company is denied a deduction for tax purposes.
  • Chapter 6 contains anti-avoidance rules for the debt cap measure.
  • Chapter 7 defines what the terms financing expense amounts and financing income amounts mean and contains rules that allow certain amounts to be excluded from the debt cap calculations.
  • Chapter 8 defines the 바카라 사이트˜tested expense amount바카라 사이트™, which is the UK measure of net finance expense, and the 바카라 사이트˜tested income amount바카라 사이트™, which provides a limit on the amount of financing income that can be exempted under the debt cap.
  • Chapter 9 explains how the 바카라 사이트˜available amount바카라 사이트™, which is the group or worldwide measure of net finance expense, is calculated.
  • Chapter 10 contains interpretative and supplementary provisions.

In addition to Part 7, there are a number of Regulations that support the primary legislation. The Regulations are:

  • The Corporation Tax (Financing Costs and Income) Regulations 2009 - these regulations provide the detailed rules for making statements of disallowance (under Part 3); statements of disregard (under part 4); appointment of the authorised company that can make statements; and the allocation of disallowance, disregard and sharing of information where statements are not made.
  • The Corporation Tax (Exclusion from Short Term Loan Relationships) Regulations 2009 - these regulations provide rules that explain the circumstances under which finance arrangements will not be treated as short-term loan relationships.
  • The Corporation Tax (Acceptable Accounting Standards) Regulations 2009 - these regulations provide details of which accounting standards (other than IAS) are acceptable for the purpose of the debt cap rules.
  • The Tax Treatment of Financing Costs and Income (Available Amount) Regulations 2010 - these regulations include certain financing expenses within the available amount.
  • The Tax Treatment of Financing Costs and Income (Correction of Mismatches) Regulations 2010 - these regulations make adjustments to the available amount where accounting differences arise on the treatment of the same expense in the relevant company바카라 사이트™s accounts and the consolidated accounts of the worldwide group.
  • The Tax Treatment of Financing Costs and Income (Excluded Schemes) Regulations 2013 - these regulations describe certain arrangements to which the anti-avoidance rules in Chapter 6 of the primary legislation should not apply.

The debt cap was repealed by Finance (No.2) Act 2017 with effect from 1 April 2017 when it was superseded by the Corporate Interest Restriction. Guidance on the new rules is available at:

/government/publications/corporate-interest-restriction-draft-guidance

Special rules apply where the period of account straddles 1 April 2017. See CFM93060 of the draft guidance for further details.