Debt cap: calculating the exemption of financing income amounts: introduction
Disregarding financing income - overview
In addition to determining the financing expense amounts of relevant group companies (see CFM91030), it is also necessary to ascertain the financing income amounts of all UK group companies. (See CFM90240 - 90250 for the difference between relevant group companies and UK group companies).
Financing income is relevant at two stages of the debt cap process.
First, it is necessary to aggregate the financing expense amounts and financing income amounts of a relevant group company in order to see whether it has a net financing deduction (CFM91020).
Second, it is necessary to determine which UK group companies have net financing income. Where a group of companies has a debt cap disallowance, TIOPA10/CH4 applies to exempt the financing income of UK group companies - see CFM91230. The total amounts exempted must not exceed the lower of the total disallowed amount, and the tested income amount of the group (CFM91220). The net financing income of group companies makes up the tested income amount.