Taxation (International and Other Provisions) Act 2010 section 394

When interest allowance is "used"

Section 394 defines how and when a worldwide group's interest allowance for a given period is treated as "used", both in the period it arises and in any later period to which unused allowance has been carried forward.

• In the period the allowance arises (the "originating period"), the amount used is the lower of the interest allowance itself and the sum of the group's net tax-interest expense plus any reactivated interest for that period.
• If unused allowance is carried forward to a later period (the "receiving period"), the amount used in that later period is the lower of the allowance still available and the portion of the receiving period's net tax-interest expense not already covered by other allowances.
• The uncovered portion of the receiving period's expense is calculated as: aggregate net tax-interest expense, minus the receiving period's own interest allowance, minus any allowance from periods earlier than the originating period that is used in the receiving period.
• If that calculation produces a negative figure, the uncovered portion is treated as nil, meaning no carried-forward allowance from the originating period is used in the receiving period.

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