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HMRC internal manual

Corporate Finance Manual

Interest restriction: public infrastructure: one fails, all fail effect for members of a joint infrastructure election

TIOPA10/S435(6)-(7)

Where one company, which is a member of a joint infrastructure election under s435, fails a condition necessary to be a qualifying infrastructure company (QIC) for an accounting period all other members of the joint election are treated as failing those tests (the ‘one fails, all fails’ effect).

However, the other members of joint election are only treated as failing those tests for so much of their accounting period in which the joint election has effect, and also in which the failing company has failed the condition necessary to be a QIC (the deemed failed period).

Example

Company X, Y and Z are members of a group.

  • X has a 12 month accounting period ending 30 June 2019.
  • Y has a 12 month accounting period ending 30 September 2019.
  • Z has a 12 month accounting period ending 31 December 2019.

Each has made an election to be a QIC which was effective for their accounting periods ending in 2019. They made a joint infrastructure election together, which is effective from 1 April 2019.

Link to the structure diagram for this example

In May 2019 Company X acquires an asset which causes it to fail the public infrastructure asset test. Company X is therefore not a QIC for its accounting period ending 30 June 2019. Company X sells the asset again on 30 June 2019 and qualifies as a QIC for its accounting period ended 30 June 2020.

The deemed failed period starts when the joint infrastructure election became effective on 1 April 2019 and ends on 30 June 2019. Company Y and Z are treated as if they were not QICs for deemed accounting periods running from 1 April 2019 to 30 June 2019.

Link to the structure diagram for this example