CFM95990 | Interest restriction: group-interest: ANGIE: debt restructuring in insolvency

The calculation of net group-interest expense (NGIE) is based on the amounts recognised as items of profit or loss. In cases where a company undertakes a debt restructuring exercise, there could be significant amounts recognised in the accounting profit or loss but excluded from computations for corporation tax.

Adjusted net group-interest expense (ANGIE) is therefore adjusted to exclude credits not brought into account following insolvency under CTA09/S322 or S323A, or would be so excluded if the company was within the charge to corporation tax.

For periods of account beginning on or after 1 January 2019, credits not brought into account under either CTA09/S358 or S359 (releases between connected companies) are also adjusted for. A downward adjustment is made for debits on the release of loans between connected companies that are prevented from being brought into account by CTA09/S354.

Example

ABC plc is the parent of a group under financial distress and there is material risk of it becoming insolvent in the near future. The creditors of the company agree to release £100m of debt as part of a debt restructuring exercise to rescue to the group. As a result, the group’s financial statements show a credit of £100m in its income statement for the period.

The credit of £100m is included in NGIE (and hence added back in the calculation of group-EBITDA for the period).

The credit of £100m is excluded from the calculation of ANGIE by way of an upward adjustment.