CFM96900 - Interest restriction: joint ventures: group ratio (blended) election: treatment of elections in investor groups

TIOPA10/S403

This section allows the group making a group ratio (blended) election some flexibility in applying or not applying certain elections that have been made by the investor groups.

It allows the group, for the purposes of the blended group ratio election, to treat the investor group as if it had made an election or as if it had not made an election. These elections have to be specified by the group making the group ratio (blended) as having been treated as being made or not made.

Where a particular election has not been so specified, then the investor is treated for the purpose of calculating the group ratio (blended) election as having made the elections that it has actually made.

Example of non-UK group that is not within Corporate Interest Regime

This allows groups that make a group ratio (blended) election more flexibility in their calculation of the blended group ratio. A specific example where this may be advantageous is in the case of an investor which is a non-UK group that is not affected by the Corporate Interest Restriction Regime.

If the example in CFM96890 is used and Y plc is a non-UK group that is not in the Corporate Interest Restriction regime then Y plc will not be able to make an interest allowance (non-consolidated investment) election. Therefore it will have a group ratio of 0% and the blended group ratio for the JV falls to 40%. This would give an interest restriction of 20.

However the group making the blended election can specify that its calculation is based upon the assumption that Y plc has made a non-consolidated investment election. This means that the calculation will now be exactly the same as in CFM96890. The blended group ratio is 50% and this creates no interest restriction from the blended calculation.