Taxation (International and Other Provisions) Act 2010 section 397

Basic interest allowance calculated using fixed ratio method

Section 397 explains how a worldwide group's basic interest allowance is calculated when using the fixed ratio method, which limits the allowance to the lower of two amounts.

• The basic interest allowance under the fixed ratio method is the lower of two calculated amounts.
• The first amount is 30% of the group's aggregate tax-EBITDA for the period of account.
• The second amount is the fixed ratio debt cap, which is based on the group's adjusted net group-interest expense.
• The allowance acts as a ceiling on the net interest deductions that UK group companies can claim for tax purposes.