The second limb of the fixed ratio method for the corporate interest restriction (CIR), the fixed ratio debt cap, limits interest relief by reference to an amount equalling the 'adjusted net group-interest expense' (ANGIE) of the group1.
The starting point in calculating ANGIE is the calculation of the 'net group-interest expense' (NGIE) of a worldwide group for a period of account2.
NGIE is computed as the sum of all relevant expense matters, LESS the sum of all relevant income matters3.
While being sourced from the financial statements, the concepts of relevant expense matters and relevant income matters are defined in a way that mirrors the income and expense amounts included in the concept of tax-interest — ie a UK corporation tax definition is applied4.
The calculation of relevant expense matters and relevant income matters includes, for example, the amounts that would be within the scope of the loan relationships rules in CTA 2009, ss 292–476, Pt 5. Relevant expense matters and relevant income matters are, however, measured by reference to the amounts appearing in the worldwide group accounts.
Relevant expense is treated as including amounts written off in respect of interest previously capitalised on any asset that is NOT a relevant asset5. An amendment was introduced by FA 2019 to put beyond doubt that amounts of income or expense that have been capitalised in respect of a relevant asset are excluded from the calculation of NGIE to the extent that they are included in amounts that are amortised