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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
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Debt cap: calculating the disallowance of financing expense amounts: calculation of disallowance

Calculating the disallowance

Having arrived at the net financing deduction for each relevant group company, these amounts are aggregated to get the tested expense amount for the group (TIOPA10//S329(1). The final step in this stage of the process is to compare the tested expense amount with the available amount (see CFM92400 onwards for computation of the available amount). Any excess of the tested expense amount over the available amount is the total disallowed amount (TIOPA10/S274(1)).

This disallowance is allocated between relevant companies, either through a statement of allocated disallowances (this process is covered in CFM91600) or through a default allocation (CFM91800).


Group H is a worldwide group and its period of account is the year to 31 March 2012. Its available amount is £12 million, and it has three UK subsidiaries. Subsidiary I has a net financing deduction of £15 million, Subsidiary J has a net financing deduction of £450,000 and Subsidiary K has a net financing deduction of £7 million.

The tested expense amount is £22 million (£15 million plus £7 million). The net financing deduction of Subsidiary J is less than £500,000 and so it is treated as nil (see CFM91080).

The total disallowed amount is the tested expense amount less the available amount which is £10 million (£22 million less £12 million). The disallowance will be allocated amongst the relevant group companies through submission of a statement of allocated disallowances, or a default allocation.