CFM99300 – Corporate Finance Manual – HMRC Internal Manual


Priority rules

The CIR applies after most other tax rules that may affect the calculation of tax interest amounts, such as transfer pricing and hybrid rules and other asymmetry rules, but before limitation of losses.

TIOPA10/382(1) defines an amount of tax interest expense as an amount which meets certain conditions and which is (or outside of TIOPA10/PT10 would) be taken into account for corporate tax purposes during a relevant accounting period of a company. S385(1) takes a similar approach with respect to tax interest income amounts. These tax interest amounts constitute the starting point for determining the group’s overall net tax interest expense (ANGIE) and it is this amount that may be subject to a restriction by the CIR (S373). It follows that other provisions must first be applied to reach the starting point for the application of the CIR.

Trading losses, uncompensated management fees and deficits of a company’s non-commercial lending relationships for a relevant accounting period are calculated on the basis of amounts which have been adjusted to reflect the application of the CIR in any accounting period world group that coincides with or overlaps the accounting period. It follows that the loss waiver and any restrictions on the use of losses (eg see CTM05000) will apply equally to amounts calculated after application of the CIR.

Interaction with Controlled Foreign Company (CFC) Legislation

The interaction of CFC legislation is governed by TIOPA10/S371SL and 371SLA.

The starting point is that a CFC should not be considered a member of a group of companies or a consortium for any provision of the tax laws. But for CIR purposes, he is treated as a member of a CIR group of which he is the only UK member. The CIR then applies in the same way as to a single-member worldwide group. However, the CFC is not authorized to take into account the de minimis amount in determining whether there is an interest restriction, nor in calculating the interest capacity for an account period.


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