What does section 395A of TIOPA 2010 do?

Section 395A preserves unused interest allowance when a new holding company is inserted above an existing group parent. Without this provision, the old group would technically cease to exist and accumulated unused interest allowance could be lost. The section ensures the carry-forward history is inherited by the new group.

When does section 395A of TIOPA 2010 apply?

Section 395A applies when a company ceases to be the ultimate parent of a worldwide group because a new holding company is inserted above it in a qualifying takeover under section 724A of CTA 2010. The shareholders must hold identical or as near identical proportional interests in the new parent as in the old parent.

How does the carry forward of interest allowance work under section 395A?

The first period of account of the new group begins on the day of the qualifying takeover, while the old group's last period ends the day before. The old group's prior periods of account are treated as periods of the new group, so any accumulated unused interest allowance is inherited and remains available for carry forward.

What is a qualifying takeover for the purposes of section 395A TIOPA 2010?

A qualifying takeover is a change in ownership disregarded under section 724A of the Corporation Tax Act 2010. It applies where shareholders' proportional interests in the new holding company are identical, or as near identical as possible, to their interests in the old parent, ensuring only genuine holding company reorganisations qualify.

Taxation (International and Other Provisions) Act 2010 section 395A

Carry forward of interest allowance: new holding company

Section 395A ensures that when a group restructures by inserting a new holding company above the existing parent, any unused interest allowance built up by the old group can be carried forward and used by the new group.

The section applies where a company ceases to be the ultimate parent of a group because a new holding company is inserted above it in a qualifying takeover
A qualifying takeover means a change in ownership that is disregarded under section 724A of CTA 2010, essentially because shareholders' proportional interests in the new parent are identical (or as near identical as possible) to their interests in the old parent
The first period of account of the new group is treated as starting on the day of the takeover, and the last period of account of the old group is treated as ending the day before
Any interest allowance of the new group is calculated as though the old group's earlier periods of account were periods of account of the new group, preserving the carry-forward history

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