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HMRC internal manual

International Manual

HM Revenue & Customs
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Controlled Foreign Companies: The CFC Charge Gateway Chapter 9 - Exemptions for profits from Qualifying Loan Relationships: Matched Interest Rule: Finance Income amounts falling under more than one chapter

For the purposes of the matched interest rule, where there are amounts treated as financing income amounts under TIOPA10/Part 9A/Chapters 5 or 6 as well as Chapter 9, it is assumed that the Chapter 9 amount creates or increases any excess of tested income amount (TIA) over tested expense amount (TEA). This is in order to maximise relief under section 371IE.

Section 371IE(6) to (9) provide modifications to the worldwide debt cap rules in TIOPA10/Part 7, but only for the purposes of applying this section. One effect is to require that a calculation of TIA and TEA be made for a UK group, if one has not already been made as a consequence of the various exemptions and exclusions within Part 7. This ensures that banking and insurance groups and groups that are not large groups can take advantage of the matched interest rule as well as groups that have not met the gateway conditions within section 261 so that Part 7 does not apply to them.

Section 371IE(9) provides a limitation that excludes debits, credits and other amounts that arise from UK banking or insurance business in determining what the TIA and TEA would be. This is because such companies are likely always to be in a net finance surplus position in respect of their trading finance debits and credits and so to include such amounts would mean that the matched interest rule would apply to fully exempt all the non trading finance profits arising on qualifying loan relationships in respect of such companies.