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HMRC internal manual

Corporate Finance Manual

Debt cap: introduction to allocating the disallowance and exemption: no disallowance needed

This guidance applies to worldwide group periods of account ending before or straddling 1 April 2017.

Cases where there is no disallowance

Where a group has no overall disallowance under the debt cap, there will be no need for the authorised company to make a statement of allocated disallowances. This may happen because:

  • the worldwide group is not within TIOPA10/PART 7 for the period of account under consideration, either because it passes the gateway test, or is a qualifying financial services group, or is not ‘large’; or
  • it has applied the debt cap rules, but the tested expense amount does not exceed the available amount and there is, accordingly, no disallowance.

In neither case is there any statutory obligation on companies to submit the computations that have led to this conclusion, unless they are requested by HMRC as part of an enquiry. In practice, however, a group in this position may wish - as part of normal discussions with its Customer Compliance Manager - to inform HMRC about its debt cap position each year or (if the position is likely to stay the same for a number of years, for example where the group is a qualifying financial services group) to an agreed timetable.

The position is different where a group has a debt cap disallowance, but it is completely ‘covered’ by disregard of financing income in UK group companies. The group must make both a statement of allocated disallowances and a statement of allocated exemptions, even if the overall result is that - on a group basis - the CT paid by the group is unchanged.