CFM98440 - Interest restriction: administration: reporting requirements: the abbreviated interest restriction return: TIOPA10/SCH7A/PARA20

TIOPA10/SCH7A/PARA20

The submission of an interest restriction return is only obligatory if a reporting company has been appointed, either by the group or by HMRC. A group that is not subject to interest restriction, for instance one whose aggregate net tax-interest expense (ANTIE) falls below the de minimis limit of £2m per annum, is not obliged to file a return or appoint a reporting company.

However, where a group that is not subject to interest restriction for a period of account has filed an interest restriction return, whether abbreviated or full, it can submit a revised return, which must be a full return, up to 60 months after the end of the period. This would enable unused interest allowance to be accessed in later periods. Accordingly appointment of a reporting company and submission of a return is potentially advantageous.

Where a reporting company is in place, but the group does not expect to be subject to interest restriction in a period of account, it may elect under TIOPA10/SCH7A/PARA19 to submit an abbreviated interest restriction return rather than a full interest restriction return. The election is made in the return (see PARA12(3)(g)), and relates to a period of account. An election made earlier may be revoked, in a subsequent full interest restriction return. The reporting company must submit an abbreviated interest restriction return via a digital form on the government gateway, or by using commercial software. For more information on this process, see the CIR internet page.

The decision that no interest restriction is due may be based on prudent estimates. The provisions in PARA27 about estimates apply to statements that may be included in a full interest restriction return but not in an abbreviated interest restriction return, so there is no specific requirement to disclose this.

Where an abbreviated interest restriction return is submitted for a period of account, it will not be possible to access the interest allowance for that period in a later period (see TIOPA10/S393). Where a group subsequently decides that it would like to access that interest allowance, it may submit a revised and full return, no later than 60 months after the end of the period of account (PARA9(2)). An abbreviated return may include elections and a revised full return submitted later may include any elections for which the time limit has not passed.

The submission of an abbreviated interest restriction return is likely to be most appropriate for groups with the following characteristics:

  • The group’s aggregate net tax-interest expense (ANTIE) exceeds the £2m per annum de minimis limit; but
  • The level of aggregate tax-EBITDA and adjusted net group-interest expense (ANGIE) are sufficiently high that no interest restriction will be due and;
  • This is also expected to be the case in later periods, so that the group will have no need to bring forward unused interest allowance from earlier periods of account.

If the assumption in the third bullet point subsequently proves to be incorrect, the group may revoke its abbreviated interest restriction return elections for earlier periods and submit revised and full interest restriction returns for those earlier periods, so as to make unused interest allowance available. Note that the election must be revoked and full interest restriction returns submitted not only for the period of account whose allowance is to be accessed, but also for any intervening periods.

A group could choose to submit a return even if its ANTIE is less than the de minimis amount if it considers it possible that it might later need to access unused tax allowance for this period. Note that although the de minimis amount for a period sets a minimum level of interest capacity for a period, it does not increase any interest allowance available to carry forward.

An abbreviated interest restriction return must state that the group is not subject to interest restrictions for the return period. It must include the following items (see PARA20(5)). In addition, PARA20(5A) provides that HMRC may, by notice, specify further information that should be included in an interest restriction return.

PARA20(3)(a)

The name and UTR (if it has one) of the ultimate parent of the worldwide group - see CFM98430.

PARA20(3)(b)

The return period - see CFM98430.

PARA20(3)(c)

The names and UTRs (where there is one) of all companies that were UK group companies at any time in the period of account and whether or not they are consenting companies - see CFM98430. A UK-incorporated company will not be in the charge to corporation tax where it has been inactive since incorporation or is accepted by HMRC as dormant and nothing has happened to bring it into the charge to corporation tax.

PARA20(3)(g)

There must be a declaration by the person making the return that the return is, to the best of that person’s knowledge, correct and complete - see CFM98430.

HMRC Notice published 25 August 2022

This notice provides that, for returns submitted from 1 October 2022, the interest restriction return must also:

  • State the country of incorporation of the ultimate parent, where the parent does not have a CT UTR;
  • Provide the Legal Entity Identifier of the ultimate parent, where it has one;
  • State which (if any) companies within the group have made a qualifying infrastructure company election under TIOPA10/S433 which has effect within the period of account, and

State the self assessment UTRs of any UK partnerships in respect of which the group has made an interest allowance (consolidated partnerships) election under TIOPA10/SCH7A/PARA18.

A statement of calculations is not required.

There is no interest reactivation, so such details are not required.