Corporation Tax Act 2010 section 331

Meaning of "financing costs" etc.

Section 331 defines what counts as "financing costs" for the purpose of calculating the supplementary charge on ring fence trades under section 330, covering a broad range of debt-related costs including loan relationships, derivative contracts, and lease obligations.

• Financing costs means the costs of debt finance, encompassing loan relationship debits, exchange gains and losses on debt finance, and derivative contract credits and debits related to debt finance
• The implicit financing cost within finance lease payments, interest expenses on right-of-use long funding finance leases, deductible amounts on long funding operating leases, and any other costs arising from transactions regarded as financing under generally accepted accounting practice are all included
• Where a payment is treated as a finance charge or interest expense in group-level accounts prepared under generally accepted accounting practice but not in the individual company's own accounts, it is still treated as a financing cost; equally, if a financing cost is excluded from adjusted ring fence profits and is later repaid, that repayment is also excluded
• A finance lease is defined as a lease that would be classified as a finance lease or loan under generally accepted accounting practice in the accounts of the lessee or a connected person, and for right-of-use leases this test is applied as though the lessee and any connected person were UK-incorporated companies