Taxation (International and Other Provisions) Act 2010

[F1 Tax-interest expense and income amounts: basic rules] U.K.

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F1 Pt. 10: the existing Pt. 10 renumbered as Pt. 11 (except for ss. 375, 376 which are repealed), the existing ss. 372-374, 377-382 renumbered as ss. 499-507 and a new Pt. 10 (ss. 372-498) inserted (with effect in accordance with Sch. 5 para. 25(1)-(3) of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)

[F1 382 The tax-interest expense amounts of a company U.K.

(1) References in this Part to a “tax-interest expense amount” of a company for a period of account of a worldwide group are to any amount that—

(a) is (or apart from this Part would be) brought into account for the purposes of corporation tax in a relevant accounting period of the company, and

(b) meets condition A, B or C.

[F2 (1A) But, in the case of a company which is a charity (as defined in paragraph 1 of Schedule 6 to FA 2010) at the end of the period of account, references in this Part to a “tax-interest expense amount” of the company do not include references to an amount which meets Condition A, B or C.]

(2) Condition A is that the amount is a relevant loan relationship debit (see section 383).

(3) Condition B is that the amount is a relevant derivative contract debit (see section 384).

(4) Condition C is that the amount is in respect of the financing cost implicit in amounts payable under a relevant arrangement or transaction.

(5) In subsection (4) “relevant arrangement or transaction” means—

(a) a finance lease,

(b) debt factoring, or any similar transaction, or

(c) a service concession arrangement if and to the extent that the arrangement is accounted for as a financial liability.

(6) Subsection (8) applies if an accounting period in which a tax-interest expense amount is (or apart from this Part would be) brought into account for the purposes of corporation tax contains one or more disregarded periods.

(7) A “disregarded period” is any period falling within the accounting period—

(a) which does not fall within the period of account of the worldwide group, or

(b) throughout which the company is not a member of the group.

(8) Where this subsection applies, the tax-interest expense amount mentioned in subsection (6) is reduced by such amount as is referable, on a just and reasonable basis, to the disregarded period or periods mentioned in that subsection.

(9) An amount may be reduced to nil under subsection (8).

(10) If—

(a) an amount would have met condition A, B or C but for the application of a rule preventing its deduction,

(b) some or all of it is deductible at a subsequent time as a result of the application of another rule, and

(c) none of conditions A to C are met at that time,

so much of the amount as is subsequently deductible is treated, at that time, as meeting whichever of condition A, B or C would have been met but for the application of the rule mentioned in paragraph (a).

(11) An example of a case to which subsection (10) applies is a case where—

(a) an amount is prevented from being deducted as a result of any provision made by Part 6A (hybrid and other mismatches), and

(b) another provision of that Part subsequently applies so as to permit some or all of it to be deducted from total profits.]

Textual Amendments

F2 S. 382(1A) inserted (with effect in accordance with Sch. 3 para. 30-36 of the amending Act) by Finance (No. 2) Act 2023 (c. 30), Sch. 3 para. 2

[F1 383 Relevant loan relationship debits U.K.

(1) This section applies for the purposes of section 382.

(2) An amount is a “relevant loan relationship debit” if—

(a) it is a debit that is (or apart from this Part would be) brought into account for the purposes of corporation tax in respect of a loan relationship under—

(i) Part 3 of CTA 2009 as a result of section 297 of that Act (loan relationships for purposes of trade), or

(ii) Part 5 of that Act (other loan relationships), and

(b) is not an excluded debit.

(3) A debit is “excluded” for the purposes of subsection (2)(b) if—

(a) it is in respect of an exchange loss (within the meaning of Parts 5 and 6 of CTA 2009), or

(b) it is in respect of an impairment loss.

384 Relevant derivative contract debits U.K.

(1) This section applies for the purposes of section 382.

(2) An amount is a “relevant derivative contract debit” if—

(a) it is a debit that is (or apart from this Part would be) brought into account for the purposes of corporation tax in respect of a derivative contract under—

(i) Part 3 of CTA 2009 as a result of section 573 of that Act (derivative contracts for purposes of trade), or

(ii) Part 5 of that Act as a result of section 574 of that Act (other derivative contracts),

(b) it is not an excluded debit, and

(c) the condition in subsection (4) is met.

(3) A debit is “excluded” for the purposes of subsection (2)(b) if—

(a) it is in respect of an exchange loss (within the meaning of Part 7 of CTA 2009),

(b) it is in respect of an impairment loss, or

[F3 (c) it is in respect of a risk arising in the ordinary course of a trade (other than a risk arising in the ordinary course of a financial trade) where the derivative contract was entered into wholly for reasons unrelated to the capital structure of the worldwide group (or any member of the worldwide group).]

[F4 (3A) For the purposes of subsection (3)(c) a debit is in respect of a risk arising in the ordinary course of “a financial trade” only so far as the risk relates to an amount which is or is likely to be—

(a) a tax-interest expense amount, or

(b) a tax-interest income amount,

of the company in any relevant accounting period.]

(4) The condition referred to in subsection (2)(c) is that the underlying subject matter of the derivative contract consists only of one or more of the following—

(a) interest rates;

(b) any index determined by reference to income or retail prices;

(c) currency;

(d) an asset or liability representing a loan relationship;

(e) any other underlying subject matter which is—

(i) subordinate in relation to any of the matters mentioned in paragraphs (a) to (d), or

(ii) of small value in comparison with the value of the underlying subject matter as a whole.

(5) For the purposes of this section, whether part of the underlying subject matter of the derivative contract is subordinate or of small value is to be determined by reference to the time when the company enters into or acquires the contract.

(6) In this section “underlying subject matter” has the same meaning as in Part 7 of CTA 2009.

Textual Amendments

F3 S. 384(3)(c) substituted (with effect in accordance with Sch. 8 para. 22 of the amending Act) by Finance Act 2018 (c. 3), Sch. 8 para. 2(2)

F4 S. 384(3A) inserted (with effect in accordance with Sch. 8 para. 22 of the amending Act) by Finance Act 2018 (c. 3), Sch. 8 para. 2(3)

385 The tax-interest income amounts of a company U.K.

(1) References in this Part to a “tax-interest income amount” of a company for a period of account of a worldwide group are to any amount that—

(a) is (or apart from this Part would be) brought into account for the purposes of corporation tax in a relevant accounting period of the company, and

(b) meets condition A, B, C or D.

(2) Condition A is that the amount is a relevant loan relationship credit (see section 386).

(3) Condition B is that the amount is a relevant derivative contract credit (see section 387).

(4) Condition C is that the amount is in respect of the financing income implicit in amounts receivable under a relevant arrangement or transaction.

(5) In subsection (4) “relevant arrangement or transaction” means—

(a) a finance lease,

(b) debt factoring, or any similar transaction, or

(c) a service concession arrangement if and to the extent that the arrangement is accounted for as a financial asset.

(6) Condition D is that the amount is in respect of income that—

(a) is receivable from another company, and

(b) is in consideration of the provision of a guarantee of any borrowing of that other company.

(7) Subsection (9) applies if an accounting period in which a tax-interest income amount is (or apart from this Part would be) brought into account for the purposes of corporation tax contains one or more disregarded periods.

(8) A “disregarded period” is any period falling within the accounting period—

(a) which does not fall within the period of account of the worldwide group, or

(b) throughout which the company is not a member of the group.

(9) Where this subsection applies, the tax-interest income amount mentioned in subsection (7) is reduced by such amount as is referable, on a just and reasonable basis, to the disregarded period or periods mentioned in that subsection.

(10) An amount may be reduced to nil under subsection (9).

386 Relevant loan relationship credits U.K.

(1) This section applies for the purposes of section 385.

(2) An amount is a “relevant loan relationship credit” if—

(a) it is a credit that is (or apart from this Part would be) brought into account for the purposes of corporation tax in respect of a loan relationship under—

(i) Part 3 of CTA 2009 as a result of section 297 of that Act (loan relationships for purposes of trade), or

(ii) Part 5 of that Act (other loan relationships), and

(b) it is not an excluded credit.

(3) A credit is “excluded” for the purposes of subsection (2)(b) if—

(a) it is in respect of an exchange gain (within the meaning of Parts 5 and 6 of CTA 2009), or

(b) it is in respect of the reversal of an impairment loss.

387 Relevant derivative contract credits U.K.

(1) This section applies for the purposes of section 385.

(2) An amount is a “relevant derivative contract credit” if—

(a) it is a credit that is (or apart from this Part would be) brought into account for the purposes of corporation tax in respect of a derivative contract under—

(i) Part 3 of CTA 2009 as a result of section 573 of that Act (derivative contracts for purposes of trade), or

(ii) Part 5 of that Act as a result of section 574 of that Act (other derivative contracts),

(b) is not an excluded credit, and

(c) the condition in subsection (4) is met.

(3) A credit is “excluded” for the purposes of subsection (2)(b) if—

(a) it is in respect of an exchange gain (within the meaning of Part 7 of CTA 2009),

(b) it is in respect of the reversal of an impairment loss, or

[F5 (c) it is in respect of a risk arising in the ordinary course of a trade (other than a risk arising in the ordinary course of a financial trade) where the derivative contract was entered into wholly for reasons unrelated to the capital structure of the worldwide group (or any member of the worldwide group).]

[F6 (3A) For the purposes of subsection (3)(c) a credit is in respect of a risk arising in the ordinary course of “a financial trade” only so far as the risk relates to an amount which is or is likely to be—

(a) a tax-interest expense amount, or

(b) a tax-interest income amount,

of the company in any relevant accounting period.]

(4) The condition referred to in subsection (2)(c) is that the underlying subject matter of the derivative contract consists only of one or more of the following—

(a) interest rates;

(b) any index determined by reference to income or retail prices;

(c) currency;

(d) an asset or liability representing a loan relationship;

(e) any other underlying subject matter which is—

(i) subordinate in relation to any of the matters mentioned in paragraphs (a) to (d), or

(ii) of small value in comparison with the value of the underlying subject matter as a whole.

(5) For the purposes of this section, whether part of the underlying subject matter of the derivative contract is subordinate or of small value is to be determined by reference to the time when the company enters into or acquires the contract.

(6) In this section “underlying subject matter” has the same meaning as in Part 7 of CTA 2009.]

Textual Amendments

F5 S. 387(3)(c) substituted (with effect in accordance with Sch. 8 para. 22 of the amending Act) by Finance Act 2018 (c. 3), Sch. 8 para. 3(2)

F6 S. 387(3A) inserted (with effect in accordance with Sch. 8 para. 22 of the amending Act) by Finance Act 2018 (c. 3), Sch. 8 para. 3(3)