Taxation (International and Other Provisions) Act 2010 section 372

Overview

Section 372 provides an overview of the corporate interest restriction rules, which limit the amount of interest and financing costs that companies within a worldwide group can deduct for corporation tax purposes.

• The rules can disallow some or all of a company's interest and financing costs that would otherwise be deductible for corporation tax, and allow previously disallowed amounts to be carried forward and used in later periods.
• A worldwide group's "interest capacity" — the maximum amount of net interest expense the group can deduct — is based on the group's interest allowance (calculated using either a fixed ratio or a group ratio method) plus any unused allowance from the previous five years, subject to a de minimis amount.
• The rules operate by reference to key concepts including net tax-interest expense and income for individual companies, aggregate amounts across the group, and tax-EBITDA (a measure of taxable earnings before interest, tax, depreciation and amortisation).
• Special rules apply to public infrastructure, certain types of company (such as banks, oil companies, REITs and insurers), particular transactions, and arrangements connected with tax avoidance.