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HMRC internal manual

Corporate Finance Manual

Interest restriction: core rules: administration

TIOPA10/SCH7A

The Corporate Interest Restriction rules differ from the normal corporation tax regime in that the computational provisions work mainly at the level of the worldwide group. Only once the group level computations have been made can disallowances of net interest expense, or reactivations of previously disallowed amounts, be allocated to UK group companies. TIOPA10/SCH7A contains legislation designed to enable efficient administration of the provisions. Both detailed guidance and a more comprehensive summary are available.

The administrative rules are built around the interest restriction return. Where the aggregate net tax-interest expense exceeds or is close to the de minimis amount, a group will normally appoint a reporting company to act on its behalf. If it does not, HMRC may do so.

In the unusual event that a tax-interest restriction arises but there is no reporting company each UK group company in a worldwide group will need to compute its share of the restriction and include it in its company tax returns.

Normally a reporting company will allocate the restriction at its discretion, but a company that does not consent to this may not be allocated more than a pro-rata share, proportional to its share of the group’s tax-interest expense.

Reactivations of previous interest restrictions may only occur where there is a reporting company. Again, the allocation is at the discretion of the reporting company.

The Corporate Interest Restriction has its own enquiry procedures, based on CTSA enquiry procedures adapted to fit the group context. These are supported by information powers and penalties for non-compliance.