Worldwide debt cap ― main provisions

By Tolley

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

  • Worldwide debt cap ― main provisions
  • Position on or after 1 April 2017
  • Position before 1 April 2017
  • Overview
  • Scope and exemptions
  • The Gateway Test
  • Detailed Methodology
  • Disallowance of deductions
  • Exemption of Financing Income
  • ‘De minimis’ rule
  • Compliance requirements
  • Special classes of business
  • Reliefs
  • Regulation making powers
  • Problem areas
  • Targeted anti-avoidance rule (TAAR)

Position on or after 1 April 2017

As a direct consequence of the introduction of the corporate interest restriction (CIR), the worldwide debt cap (WWDC) was repealed with effect from 1 April 2017.

F(No 2)A 2017, Sch 5, para 11(1)

Although the WWDC has been repealed, the principles behind it have been largely incorporated into the CIR as the so-called ‘modified debt cap’. For an overview of CIR, see the Introduction to the corporate interest restriction guidance note.

The repeal applies to periods of account of the worldwide group commencing on or after 1 April 2017. Periods of account straddling 1 April 2017 are treated as separate periods with CIR applying to the later period and WWDC applicable to the earlier period.

F(No 2)A 2017, Sch 5, para 26(2)–(5)

The remainder of this guidance note deals with the legislation in force before 1 April 2017.

Position before 1 April 2017

The WWDC is one of five measures originally announced in the 2008 Pre-Budget Report as part of the package of measures reforming the taxation of foreign profits.

The regime is complex, however this guidance note summarises the key elements.

Finance Act 2014 introduced two changes to the regime; to expand the grouping rules and amend the regulation making powers of HMRC. For information on both these changes, please see the Tax information and impact note (TIIN) and explanatory note  issued by HMRC.

HMRC guidance is set out in CFM90000.


The primary legislation governing the Tax Treatment of Financing Cost and Income, more generally referred to as ‘the WWDC’, can be found in TIOPA 2010, ss 260–353B (Pt 7), as amended by subsequent Finance Acts. There is also secondary legislation in the form of Statutory Instruments which give effect to associated Regulations.

The rules apply

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