Debt cap: introduction to allocating the disallowance and exemption: interaction with CTSA
This guidance applies to worldwide group periods of account ending before or straddling 1 April 2017.
CTSA returns of affected companies
The end result of an authorised company making a statement of allocated disallowances is the identification of a number of companies, each of which has a disallowance of one or more financing expense amounts. The relevant disallowances must be shown in the affected company’s tax computations and CTSA return. A statement of allocated disallowances does not relieve any individual company of its statutory obligations to make correct CTSA returns within the time limit.
However, companies whose accounting period does not coincide with the period of account of the worldwide group may experience particular difficulties. For example, suppose the accounting reference date for the worldwide group is 31 December, but a particular relevant group company prepares its accounts to 31 March. When making its CTSA return for (say) year ended 31 March 2012, the company will need to have regard to disallowances allocated to it in both for calendar year 2011 and calendar year 2012. Since the authorised company has until 31 December 2013 to make the latter statement, it will not necessarily be available by 31 March 2013, when the relevant group company must make its return.
As in any other case where a company is unable to put final figures in its return, the company should make the best estimate of what the overall disallowance will be, and then amend its return to show the correct the figure as soon as is feasible (see CTM93280).
Similar considerations apply to statements of allocated exemptions.
Trading or non-trading?
TIOPA10/S280 (4) requires the statement of allocated disallowances to specify, for each company that is listed, particular financing expense amounts. This means that the statement will differentiate between financing expense amounts that would be relieved as non-trading loan relationships debits, and amounts that would be relieved as trading expenses. This allocation should be followed in the company’s CTSA return.
Again, similar considerations apply to the allocation of exemptions - it should be clear whether trading income, or non-trading loan relationships credits, are being disregarded.
Documents with the CTSA return
Regulation 10 of The Corporation Tax (Financing Costs and Income) Regulations 2009 provides that, where an authorised company has been appointed, a statement of allocated disallowances must be submitted to the tax office dealing with the CT affairs of the authorised company. Regulation 25 makes parallel provision for statements of allocated exemptions.
There is no statutory requirement for groups to submit copies of the statement or statements with the CTSA returns of each company affected, although some groups may wish to do so. If the CTSA return for a company shows a debt cap disallowance, or a disregard of financing income, HMRC staff should use internal channels to obtain copies of the relevant statement(s) before making any enquiries of the company about the derivation of the figures.