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HMRC internal manual

Corporate Finance Manual

Debt cap: calculating the disallowance of financing expense amounts: de minimis amount

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

How small is small?

Once the financing expense amounts and financing income amounts are calculated and the expenses deducted from the income (see CFM91020) we need to consider if the difference is within the de minimis limit in TIOPA10/S331.

The difference is ‘small’ and within the de minimis limit if it is less than £500,000.

If the net financing deduction is small, section 331 says that it is to be taken as nil. So a company with a small difference has a nil net financing deduction.

The de mimimis amount applies for a period of account of the worldwide group, so that when a company joins or leaves a group there is no need to apportion the de minimis limit. In the case of a relevant group company with a non-coterminous accounting period which arises in more than one accounting period, the financing income or expenses are calculated for the period of account of the worldwide group and the de minimis limit is applied to the result.

If a group has an accounting period ending on 31 December 2014 but the relevant group company prepares its accounts to 31 March every year the financing expenses and income of the relevant group company would be calculated by reference to the three months in its accounts to 31/03/2013 and the nine months of its accounts to 31/03/2014, and the de minimis limit would apply to the resultant financing income or expense.

For periods of account ending on or after 17 July 2012 groups can opt out of the de minimis amount by making an election under TIOPA10/S331ZA - see CFM91085