Taxation (International and Other Provisions) Act 2010

[F1 372 Overview U.K.

(1) This Part contains provision that—

(a) disallows certain amounts that a company would (apart from this Part) be entitled to bring into account for the purposes of corporation tax in respect of interest and other financing costs, and

(b) allows certain amounts disallowed under this Part in previous accounting periods to be brought into account in later accounting periods.

(2) In this Chapter—

(a) section 373 defines some key concepts including, in particular, “the total disallowed amount” in relation to a period of account of a worldwide group, and

(b) section 374 provides for Schedule 7A to have effect.

(3) Chapter 2 provides for—

(a) the disallowance in certain circumstances of tax-interest expense amounts of companies that are members of a worldwide group, and

(b) the carrying forward of disallowed tax-interest expense amounts, and for bringing those amounts into account in certain circumstances in relation to a later period of account of the worldwide group.

(4) Chapter 3—

(a) defines “a tax-interest expense amount” and “a tax-interest income amount” of a company for a period of account of a worldwide group, which are amounts that are (or apart from this Part would be) brought into account for the purposes of corporation tax,

(b) defines “the net tax-interest expense” of a company for a period of account of a worldwide group, which is any excess of the company's tax-interest expense amounts for the period over its tax-interest income amounts for the period,

(c) defines “the net tax-interest income” of a company for a period of account of a worldwide group, which is any excess of the company's tax-interest income amounts for the period over its tax-interest expense amounts for the period, and

(d) defines “aggregate net tax-interest expense” and “aggregate net tax-interest income” of a worldwide group for a period of account of the worldwide group, which are made up of each member of the group's net tax-interest expense or net tax-interest income for the period.

(5) Chapter 4 contains provision about the calculation of “the interest capacity” of a worldwide group for a period of account of the group, which is the aggregate of the interest allowance for the period and any unused interest allowance of the group from the previous 5 years (or, if that aggregate is less than the de minimis amount, the de minimis amount).

(6) Chapter 5 makes provision about the calculation of “the interest allowance” of a worldwide group for a period of account of the group.

The interest allowance for a period of account is calculated using the fixed ratio method unless the group elects for the group ratio method to be used for the period.

(7) Chapter 6 defines concepts used in Chapter 5 including—

• the “tax-EBITDA” of a company for a period of account of a worldwide group (which is an amount derived from amounts brought into account for the purposes of corporation tax);

• the “aggregate tax-EBITDA” of a worldwide group for a period of account of the group (which is an amount derived from the tax-EBITDA of members of the group).

(8) Chapter 7 defines additional concepts used in Chapter 5 including—

• “the net group-interest expense”, “the adjusted net group-interest expense” and “the qualifying net group-interest expense” of a worldwide group for a period of account of the group (which are amounts derived from the financial statements of the worldwide group);

• the “group-EBITDA” of the worldwide group for a period of account of the group (which is an amount derived from the financial statements of the worldwide group).

(9) Chapter 8 contains provision altering the way in which this Part has effect in relation to the provision of public infrastructure assets or the carrying on of certain other related activities.

(10) Chapter 9 contains special provision altering the operation of certain provisions of this Part in relation to—

(a) particular types of company (for example, banking companies, companies carrying on oil-related activities, REITs or insurance companies), or

(b) particular types of transaction or accounting (for example, long funding operating leases or fair value accounting).

(11) Chapter 10 contains rules connected with tax avoidance.

(12) Chapter 11 contains the remaining interpretative and supplementary provision, including definitions of—

• “related party”;

• “a worldwide group”;

• “ultimate parent”;

• “period of account” of a worldwide group.]

Textual Amendments

F1 Pt. 10: the existing Pt. 10 renumbered as Pt. 11 (except for ss. 375, 376 which are repealed), the existing ss. 372-374, 377-382 renumbered as ss. 499-507 and a new Pt. 10 (ss. 372-498) inserted (with effect in accordance with Sch. 5 para. 25(1)-(3) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 1, 10(1)(2)(a)(3) (with Sch. 5 paras. 27, 32-34)