Debt cap: failure to make statements of allocation: default allocation of disallowance of financing expense amounts: DRICs: formulae
This guidance applies to worldwide group periods of account ending before or straddling 1 April 2017.
Calculating the default reduction: DRICs: formulae
The formulae are set out at TIOPA10/S284A.
In looking first at the subset of non-DRICS, the total of the reductions required to be made by each non-DRIC company is:
NFD / (TEA - X) x TDA, where
- NFD is the net financing deduction of the company for the relevant period of account.
- TEA is the tested expense amount for the relevant period of account
- TDA is the total disallowed amount
- X is the total of the net financing deductions of all the companies to which this Chapter applies that are dual resident investing companies.
Then in looking at the subset of DRICS, the total of the reductions required to be made by each DRIC company is:
(NFD / X) x (TDA - (TEA - X)), where the values are as shown for non-DRICs above.
An example showing the practical effect of the allocation in such circumstances is given at CFM91835.