Taxation (International and Other Provisions) Act 2010 section 400

The debt cap

Section 400 defines the "debt cap" — the maximum amount of net interest expense that a worldwide group can deduct under either the fixed ratio method or the group ratio method, and explains how any unused portion of the debt cap can be carried forward to the next period.

• The fixed ratio debt cap equals the group's adjusted net group-interest expense for the period, plus any excess debt cap carried forward from the immediately preceding period.
• The group ratio debt cap equals the group's qualifying net group-interest expense for the period, plus any excess debt cap carried forward from the immediately preceding period.
• The excess debt cap for a period is the amount by which the relevant debt cap exceeds the interest allowance actually calculated (using either 30% of aggregate tax-EBITDA or the group ratio percentage of aggregate tax-EBITDA, depending on which method applies), but this excess cannot be negative and cannot exceed the carry-forward limit.
• The carry-forward limit is the sum of the excess debt cap from the immediately preceding period plus the group's total disallowed amount for the current generating period.