Corporate interest restriction ― carry-forward amounts

Produced by Tolley
Corporate interest restriction ― carry-forward amounts

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

  • Corporate interest restriction ― carry-forward amounts
  • What can be carried forward under the CIR rules?
  • Tax-interest expense disallowance carried forward
  • Identification of tax-interest amounts to be left out of account
  • Identification of reactivated amounts of tax-interest
  • Set off of disallowances and reactivations
  • Unused interest allowance
  • Extended time limits for full interest restriction return
  • When interest allowance is used in an originating period
  • When interest allowance is used in a receiving period
  • More...

What can be carried forward under the CIR rules?

Companies may experience variations in business profits and market interest rates. Changes in capital structure that impact the level of debt on the balance sheet may also occur from time to time. These and other sources of volatility could result in interest disallowances in some periods and unused interest allowances in other periods.

To provide a greater element of fairness in the corporate interest restriction (CIR) rules, there are a number of carry-forward provisions:

Tax attributeOwnershipCarry-forward periodStatutory reference
Tax-interest disallowedCompanyIndefinite carry forwardTIOPA 2010, s 378
Unused interest allowanceWorldwide groupFive yearsTIOPA 2010, ss 392–395A
Excess debt capWorldwide groupNext period of account (PoA)TIOPA 2010, ss 400(3)–(7), 400A

As detailed in the table above, the tax attributes can belong to either the group as a whole or to an individual company. This distinction in ownership of these attributes is important.

Where the tax attribute belongs to the worldwide group, then any change to the ultimate parent will result in the loss of those tax attributes at that point, other than where, for reorganisations which take place on or after 29 October 2018, a new holding company is inserted between an existing ultimate parent company and its shareholders. (Where the group retains the same ultimate parent following a transaction, other changes to the composition of the group are ignored, ie the worldwide group is treated as the same group.) This applies in the case of all attributes except tax-interest disallowance, which belongs to the individual company to which the disallowance was allocated. Where a company moves to a different worldwide group, it will preserve its tax-interest disallowance for indefinite use, and it can be reactivated whilst it is a member of that other group or any subsequent group.

Although the excess debt cap can only be carried forward to the next PoA, it can indirectly impact the unused allowance in a later PoA.

Tax-interest expense disallowance carried

Popular documents