How is the interest capacity of a worldwide group calculated under TIOPA 2010 section 392?

Interest capacity equals the group's interest allowance for the current period of account plus any unused interest allowances carried forward from earlier periods. If this total falls below the de minimis amount, the de minimis figure is used instead, ensuring a minimum deductible threshold always applies to the worldwide group.

What is the de minimis amount under TIOPA 2010 section 392?

The de minimis amount is £2 million for a period of account that is exactly 12 months long. If the period is shorter or longer than one year, the £2 million figure is proportionately adjusted. For example, a six-month period of account would carry a de minimis amount of £1 million.

When does the de minimis floor override the formula-based interest capacity?

The de minimis floor overrides the formula result whenever the sum of the current period's interest allowance and any carried-forward unused allowances is less than the de minimis amount. This safety net ensures smaller amounts of net tax-interest expense are not caught by the corporate interest restriction rules.

Can a worldwide group carry forward unused interest allowances under section 392?

Yes, unused interest allowances from previous periods can be carried forward and added to the current period's interest allowance when calculating interest capacity. This carry-forward mechanism increases the ceiling on deductible net tax-interest expense, giving groups flexibility across accounting periods.

Taxation (International and Other Provisions) Act 2010 section 392

The interest capacity of a worldwide group for a period of account

Section 392 explains how to determine the interest capacity of a worldwide group for a given period of account, which sets the ceiling on net tax-interest deductions the group can claim.

Interest capacity equals the group's interest allowance for the current period plus any unused interest allowances carried forward from earlier periods.
If the calculated interest capacity falls below the de minimis amount, the de minimis amount is used instead.
The de minimis amount is £2 million for a full year, adjusted proportionately for periods that are longer or shorter than 12 months.
This ensures that every worldwide group can shelter at least £2 million (pro-rated) of net tax-interest expense, regardless of the formula result.

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