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HMRC internal manual

Corporate Finance Manual

Debt cap: introduction to allocating the disallowance and exemption: outline

The requirement to allocate - overview

The principle of the debt cap measure is to limit relief for deductions in respect of excessive debt owed by the UK members of the group. This is achieved by comparing for a period of account of the worldwide group (the relevant period of account) the tested expense amount with the available amount. Where the tested expense amount is greater than the available amount then the excess is disallowed.

The excess is called the total disallowed amount.

Advice on computing the tested expense amount can be found at CFM91020 and advice on the available amount can be found at CFM92400.

Once the total disallowed amount is established, it is allocated amongst the group companies. This chapter of the guidance covers the administration of the allocation of the total disallowed amount and the exemption of financing income amounts.

TIOPA10/PART 7and The Corporation Tax (Financing Costs and Income) Regulations 2009 (SI 2009/3173) contain provisions that:

  • allow the appointment of an authorised company by the group to act as the reporting body which is responsible for notifying HMRC of the allocation of the disallowance or exemption, see CFM91400 onwards;
  • describe the procedure for notifying the allocation between group companies, see CFM91600 onwards;
  • describe what is to be done if no such notification is made, see CFM91800 onwards.