Taxation (International and Other Provisions) Act 2010 section 398

Basic interest allowance calculated using group ratio method

Section 398 explains how a worldwide group's basic interest allowance is calculated when the group ratio method is used, by taking the lower of two amounts.

• The basic interest allowance under the group ratio method is the lower of two calculated amounts.
• The first amount is the group ratio percentage applied to the group's aggregate tax-EBITDA for the period.
• The second amount is the group ratio debt cap for the period.
• This method provides an alternative to the fixed ratio method and may permit a higher interest allowance where a group is more highly leveraged than average.