D1.1432 Elections impacting QNGIE or group-EBITDA
Given that QNGIE is in effect now the group ratio debt cap, groups using the group ratio method will need to consider any legitimate steps to increase QNGIE where QNGIE is the limiting factor. This would include a consideration of any available elections. For the administrative aspects of making the elections, see D1.1450.
Any election which reduces group-EBITDA and correspondingly increases GRP should also be considered where QNGIE is not the limiting factor.
A number of elections have been introduced to counter areas of perceived unfairness or in response to consultation. These elections have the potential to alter the various components within the calculations required under the fixed ratio method and/or the group ratio method. The elections, most of which are irrevocable, impact the calculation of one or more of ANGIE, QNGIE and group-EBITDA are as follows1:
• interest allowance (alternative calculation) election
• chargeable gains election
• interest allowance (non-consolidated investment) election
• group ratio (blended) election, and
• interest allowance (consolidated partnerships) election
Interest allowance (alternative calculation) election
The purpose of this election is to adjust the accounting measure of interest and group profit and loss more in line with the calculations for tax-interest expense and tax- EBITDA. The election may be generally beneficial to many groups but has a large number of moving parts so it will be quite difficult to