CFM95980 | Interest restriction: group-interest: ANGIE: equity-accounted instruments

TIOPA10/S413(3)(c), S413(4)(c), S413(6)

The calculation of net group-interest expense is based on the amounts recognised as items of profit or loss. In the majority of cases this is therefore aligned with the calculation of taxable profits. However, there are two categories of loans and derivatives where the tax treatment includes amounts recognised directly in equity. Adjusted net group-interest expense is therefore adjusted to include these amounts.

The two categories of instrument are:

• Loan relationships and derivative contracts issued in an accounting period commencing before 1 January 2016, such that they would continue to fall within CTA09/S321 and S605. Although those provisions have been repealed, they continue to have effect in respect of existing instruments under F(No.2)A15/Sch7/Para106.

• Regulatory capital securities issued by banks and insurers under the Regulatory Capital Securities Regulations 2013 (S.I. 2013/3209) for which equivalent treatment is provided for under regulation 3A.