Taxation (International and Other Provisions) Act 2010 section 381

Set-off of disallowances and reactivations in the same accounting period

Section 381 deals with the uncommon situation where, in the same accounting period, a company is both required to disallow interest expense deductions and to reactivate (restore) previously disallowed interest amounts, and provides that these must be netted off against each other.

• This section applies when the corporate interest restriction rules require both a disallowance and a reactivation of tax-interest expense amounts in the same accounting period of a company, potentially arising from different periods of account of the same or different worldwide groups.
• If the total disallowed amount equals the total reactivated amount, the two cancel each other out entirely — no amounts need to be disallowed or reactivated for that accounting period.
• If the total disallowed amount exceeds the total reactivated amount, only the net excess is disallowed (i.e. the disallowed amount minus the reactivated amount), and no reactivation takes effect.
• If the total reactivated amount exceeds the total disallowed amount, only the net excess is reactivated (i.e. the reactivated amount minus the disallowed amount), and no disallowance takes effect.