Debt cap: calculating the disallowance of financing expense amounts: election under section 331ZA
Opting out of the de minimis amount
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 section TIOPA10/331ZA. The election will apply to both the net financing deduction and net financing income of the companies in the worldwide group. If an election is made it will apply to all UK group companies (which will include all relevant group companies).
The election must be made in writing by the reporting body of the worldwide group within 12 months of the end of the first period it is to apply. The reporting body is the authorised company appointed under section 288 TIOPA or if there is no appointed company then by the UK group companies acting jointly. The election must:
- Specify the first period of account of the worldwide group to which the election applies
- Specify the name and UTR of each UK group company from the start of the first period to which the election applies up to the date of the election and all UK group companies as at the date of the election. This is to make sure that companies that are UK group companies for the first period of the election but cease to be UK group companies before the election is made are included in the election.
- Be signed by the appropriate person for the reporting body, or if there is no reporting body by the appropriate person for each UK group company.
Once an election has been made it applies until it is withdrawn or replaced by another election.
An election can be withdrawn by the relevant reporting body with effect for the period of account specified in the withdrawal. A withdrawal must be made in writing within 12 months of the end of the period of account for which the withdrawal is made.
The effect of the election is that the de minimis for the net financing deduction and net financing income no longer applies and the figures are not treated as nil under sections 329 (5) and 330 (5). Instead the net financing deductions and net financing income amounts are included in the group’s debt cap computation.
There is an identical provision at TIOPA10/S276 to appoint an authorised company to allocate disallowances. It is normal practice to make both appointments.
Detailed procedures for authorised companies are dealt with in paragraphs 19-24 of SI 2009/3173. These cover appointment of the authorised company, supplemental provisions and revocation. It is necessary to give notice of companies either leaving or joining the group.