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HMRC internal manual

Corporate Finance Manual

Interest restriction: overview: structure of the legislation

The rules for the Corporate Interest Restriction are contained within Part 10 of Taxation (International and Other Provisions) Act 2010.

The legislation is structured as follows.

  • Chapter 1 introduces the corporate interest restriction.
  • Chapter 2 explains the disallowance of tax-interest and how the carry-forward of disallowed interest works.
  • Chapter 3 defines the tax-interest expense amount, the tax-interest income amount, the net tax-interest expense and the aggregate net tax-interest expense.
  • Chapter 4 contains provision about the calculation of the interest capacity of a worldwide group for a period of account.
  • Chapter 5 contains provision about the calculation of the interest allowance of a worldwide group, including the fixed ratio method, the group ratio method.
  • Chapter 6 defines tax-EBITDA and aggregate tax-EBITDA.
  • Chapter 7 defines additional concepts used in Chapter 5 including adjusted net group-interest expense, qualifying net group-interest expense and group-EBITDA.
  • Chapter 8 contains optional alternative rules applying to the provision of public infrastructure assets.
  • Chapter 9 contains special provisions in relation to particular types of company, and particular types of transaction or accounting.
  • Chapter 10 contains anti-avoidance rules.
  • Chapter 11 contains the remaining interpretative and supplementary provision including definitions of related party, the worldwide group, the ultimate parent and the period of account of the group.
  • Schedule 7A of TIOPA 2010 contains administrative rules, including the appointment of a reporting company, interest restriction returns, enquiry procedures, information powers and penalties.

In addition F(No.2)A17/SCH10/PART3 contains consequential amendments to other legislation. Transitional and commencement rules are found in F(No.2)A17/SCH10/PART4