Taxation (International and Other Provisions) Act 2010 section 413

Adjusted net group-interest expense

Section 413 explains how to calculate the "adjusted net group-interest expense" of a worldwide group for a period of account, by taking the net group-interest expense and applying upward and downward adjustments to reflect differences between accounting treatment and corporation tax treatment of interest-related amounts.

• The adjusted net group-interest expense equals the net group-interest expense plus upward adjustments minus downward adjustments, with a floor of nil (it cannot be negative).
• Upward adjustments increase the figure and include items such as interest costs capitalised into non-financial assets, interest income excluded from the accounts but taxable for corporation tax, and certain pre-trading loan relationship debits — these broadly capture amounts that should be within the interest restriction but are not reflected in the net group-interest expense figure.
• Downward adjustments reduce the figure and include items such as interest income capitalised into non-financial assets, interest expenses that are not deductible for corporation tax purposes (for example, impairment losses on connected company debts or expenses blocked on substantial loan modifications), and dividends on preference shares treated as liabilities in the accounts.
• For periods of account ending on or after 6 April 2020 but beginning before 1 April 2023, certain upward and downward adjustments relating to pre-commencement loan relationship and derivative contract debits are switched off by default, unless the reporting company elects otherwise.