Commentary

D1.1423 Applying the corporate interest restriction fixed ratio method

Corporate tax
Corporate tax | Commentary

D1.1423 Applying the corporate interest restriction fixed ratio method

Corporate tax | Commentary

D1.1423 Applying the corporate interest restriction fixed ratio method

Once the group has calculated tax-EBITDA and ANGIE, the final step is to calculate the basic interest allowance.

The basic interest allowance under the fixed ratio method is the lower of the following amounts1:

  1.  

    •     30% × tax-EBITDA, and

  2.  

    •     the fixed ratio debt cap (generally, ANGIE)

Assuming no brought forward amounts, the interest capacity in the UK would be the lower of the two amounts above, provided it is at least the de minimis amount2.

Example (provided by TolleyGuidance)

This example demonstrates the process of calculating the restriction of interest and other financing amounts under the fixed ratio method. There are assumed to be no disregarded periods, carry forward amounts under CIR, elections or other complications.

The example is an extension of D1.1415. In that example, tax-EBITDA is calculated at £219.7m, with the interest cap of 30% being £65.91m. Since the net tax-interest expense is £33m, there is no restriction under the fixed ratio restriction, but we also need to consider the fixed ratio debt cap.

Calculation of NGIE and ANGIE

ANGIE is derived from NGIE, but subject to a series of

To continue reading
View the latest version of this document, as well as thousands of others like it, sign in to TolleyLibrary or register for a free trial