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HMRC internal manual

Corporate Finance Manual

Debt Cap: anti-avoidance rules: main rules: excluded schemes: de minimis amount

Restructuring to get within the de minimis limits

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

Regulation 11 of the Excluded Schemes Regulations (S.I. 2013/2892) deals with a transfer of a financing arrangement to a UK group company where the consequence is that its net financing deduction or net financing income is no longer small (see CFM91080 and CFM91240). The example below, which predates the regulations, sets out the background. Where arrangements fall within the scope of regulation 11, the anti-avoidance rule in TIOPA10/S307-310 are not applied.

A relevant company has a tested expense amount in excess of the de minimis limit of £500,000 arising from loans from other relevant companies but where the corresponding tested income amount due to the relevant companies are less than the de minimis limit. If the companies do not restructure the debt the debtor company will have a disallowance but the creditor companies will not be able to claim exemption for the interest income. In these circumstances the group may wish to restructure the debt to ensure that either the tested expense amount falls below the de minimis limit or that the tested income amount is in excess of the de minimis amount.

Note that for periods of account ending on or after 17 July 2012 a worldwide group may elect under TIOPA10/S331ZA that the de minimis limits do not apply, see CFM91085 and CFM91245. So, once this election was available, such restructuring should no longer have been necessary.