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HMRC internal manual

International Manual

Controlled Foreign Companies: The CFC Charge Gateway Chapter 9 - Exemptions for profits from Qualifying Loan Relationships: Matched Interest Rule: contents

Matched Interest Rule

Claims under TIOPA10/Part 9A/S371IB for up to full exemption, or then under section 371ID for partial exemption are made by reference to individual loans, or in some cases parts of loans (where the ultimate debtor rule applies to identify more than one debtor). The other exemption provided in Chapter 9 applies only to any qualifying loan relationship (“QLR” - INTM217000) profits of the CFC that haven’t been exempted by either section 371IB or 371ID. The exemption under section 371IE doesn’t have to be claimed separately; the structure of Chapter 9 means that profits can only be exempted under section 371IE once any claim for exemption under section 371IB and then section 371ID have been dealt with.

The matched interest rules applicable before 1 April 2017 (the “original rules”) borrowed principles and terms from the Debt Cap rules at TIOPA10/Part 7. Those rules applying after 1 April 2017 (the “revised rules”) use principles derived from the Corporate Interest Restriction rules TIOPA10/Part 10.

Although the matched interest rule is considered for each chargeable company that (were it not for the rule) has non-trading finance profits (“NTFPs” - INTM203000) from its QLRs apportioned to the UK, the calculation requires an examination of the finance costs of all the UK resident companies in the group and the NTFPs earned from QLRs from all the other group CFCs that would be apportioned to those UK group companies but for the matched interest rule. However, the figures from this examination will be used for all cases where section 371IE applies (and so the majority of the calculation will be the same for each CFC). This is the case under both the original rules and the revised rules.