D1.1416 Corporate interest restriction—calculating tax-interest expense amounts
The first step in calculating the total disallowed amount under the corporate interest restriction (CIR) for the companies subject to corporation tax is to calculate the tax-interest expense.
The list of relevant items can be divided into three main categories1:
• relevant loan relationship debits
• relevant derivative contract debits
• the finance expense element of a finance lease, debt factoring or similar arrangement, or a service level agreement to the extent that the agreement is accounted for as a financial liability
The hybrid and other mismatches rule in TIOPA 2010, ss 259A–259NF (Pt 6A), or some other tax rule, may defer a deduction of any amount meeting one of the above conditions to a later accounting period. In a subsequent accounting period the expense may fail to meet any of the above conditions. However, the CIR legislation provides that it will be treated as tax-interest expense at that later time2.
Relevant loan relationship debits
Broadly speaking, this includes most amounts which are deductible under the rules for loan relationships. It does not matter whether the loan has been entered into for trade purposes or not3.
Specific excluded debits comprise4:
• an exchange loss within CTA 2009, ss 292–569, Parts 5 or 6, and
• an impairment loss (other than a loss that is brought into account in respect of a financial asset for which fair value accounting is used)
Where a loan relationship asset or liability is modified, terminated or sold then any debit so arising is
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