Corporate interest restriction ― computational principles

By Tolley

The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Corporate interest restriction ― computational principles
  • Introduction
  • Worldwide group basis
  • Periods of account (PoA)
  • Acceptable GAAP
  • Relevant APs and disregarded periods


This guidance note sets out the computational principles that are relevant for the calculation of the interest disallowance using the fixed ratio method and the group ratio method under the corporate interest restriction (CIR) rules. These principles include the following:

  • the worldwide group basis
  • periods of account
  • acceptable GAAP
  • relevant accounting periods (APs) and disregarded periods

For a general overview of the regime, see the Introduction to the corporate interest restriction guidance note.

References in this guidance note are to HMRC’s guidance . The latest version, published on 28 February 2018, includes commentary on additional technical changes to ensure the regime works as intended, which have since been legislated as Finance Act 2018, s 24 and Sch 8.

Worldwide group basis

Unlike most taxing provisions, the CIR works on a group rather than a company-by-company basis. What this means is that most calculations required by the rules are carried out at the group level, with allocations of any interest restrictions (or reactivations) to individual companies within the charge to UK corporation tax being made afterwards. Many of the calculations require the extraction and aggregation of figures from the financial statements of the companies subject to UK corporation tax and the consolidated income statement of the worldwide group.

TIOPA 2010, s 473; CFM95330

A worldwide group is defined in the same way as under IFRS.

A ‘worldwide group’ usually refers to an ultimate parent and each of its consolidated subsidiaries, although it is possible to have a ‘single-company worldwide group’.

TIOPA 2010, s 473(4)(c)

The ultimate parent must be a ‘relevant entity’ defined as follows:

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