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HMRC internal manual

Corporate Finance Manual

Debt cap: failure to make statements of allocation: election for allocation of disallowance for company with multiple financing expense amounts

Making an election to allocate a default reduction

Regulation 15 specifies the order of allocating a default reduction against the individual elements making up the company’s financing expense amounts (see CFM91850). However, the company can elect to allocate a default reduction in the way it prefers.

The statutory order is given at CFM91850.

It is the responsibility of the ultimate UK parent to provide certain information (see CFM91890) to the relevant group company before the filing date of the relevant group company’s tax return. This will enable the relevant group company to satisfy the requirement to make the election in its tax return. The election must specify the particular reductions to be made.

The election can be withdrawn (with or without making a new election) at any time that the company submits an amended tax return under FA98/SCH18/PARA15 (4). If having withdrawn an election, the company does not make a new election, the allocation specified in regulation 15 applies.