CFM98590 | Interest restriction: administration: reporting requirements: calculating pro-rata allocations per company

TIOPA10/SCH7A/PARA23

Computing pro-rata amounts may involve two steps. The first is a computation of the pro-rata amount for a non-consenting UK group company for a period of account. Then, if the company’s accounting periods do not coincide with the worldwide group’s period of account, it is necessary to allocate the amount between accounting periods of the non-consenting company.

The computation of a non-consenting company’s pro-rata share for a period of account is determined by a formula in TIOPA10/SCH7A/PARA23. The formula is A x B/C, where:

• Amount A is the total disallowed amount for the worldwide group (TIOPA10/S373(2))

• Amount B is the net tax-interest expense of the company for the period of account (S372(4)(b))

• Amount C is the sum of the net tax-interest expense amounts for the period of account for all companies that have net tax-interest expense.

A company with net tax-interest income is treated as having net tax interest of zero and its net tax-interest income is not taken into account in the computation, therefore if a company does not have net tax-interest expense, its pro-rata allocation is zero.