Section 371IE | The “matched interest profits” exemption ^F1F2

(1)This section applies if—^F1F2

(a)there are profits of qualifying loan relationships which are not exempt after sections 371IB and 371ID have been applied to each qualifying loan relationship,^F1F2

(b)the relevant corporation tax accounting period (as defined in section 371BC(3)) of company C is a relevant accounting period of it in relation to a period of account of a worldwide group,^F1F2

(c)the CFC's accounting period ends in that period of account, and^F1F2

(d)apart from this section, the profits mentioned in paragraph (a) would be included in the chargeable profits of the CFC.^F1F2

(2)In this section “the matched interest profits” means so much of the profits mentioned in subsection (1)(a) as remain after excluded credits and excluded debits are left out of account.^F1F2

(3)If the aggregate net tax-interest expense of the group for the period is nil, all of the matched interest profits are exempt.^F1F2

(4)Otherwise, there is a more limited exemption if the relevant proportion of the matched interest profits apportioned to C or other relevant chargeable companies exceeds the aggregate net tax-interest expense of the group for the period.^F1F2

(5)For the purposes of this section “the relevant proportion of the matched interest profits apportioned to C or other relevant chargeable companies” is determined as follows.^F1F2

Step 1 For each relevant chargeable company (including C) determine the percentage (P%) of the CFC's chargeable profits that are apportioned to the company under step 5 of section 371BC(1).

Step 2 For each relevant chargeable company (including C) multiply P% by the matched interest profits.

Step 3 The sum of the amounts for each company found under step 2 is “the relevant proportion of the matched interest profits apportioned to C or other relevant chargeable companies”.

(6)For the purposes of this section a company is a relevant chargeable company if the relevant corporation tax accounting period of the company is a relevant accounting period in relation to the period of account of the group.^F1F2

(7)The limited exemption is given effect by treating the matched interest profits as equal to the amount found by multiplying the amount that they would otherwise be by—^F1F2

(8)For the purposes of this section the aggregate net tax-interest expense of a worldwide group for a period of account is determined in accordance with Part 10 (corporate interest restriction) but without regard to debits, credits or other amounts arising from—^F1F2

(a)banking business carried on by a company within the charge to corporation tax, or^F1F2

(b)insurance business carried on by a company within the charge to corporation tax.^F1F2

(9)For the purposes of this section—^F1F2

“excluded credit” has the meaning given by section 386(3),

“excluded debit” has the meaning given by section 383(3), and

“period of account”, “relevant accounting period” and “worldwide group” have the same meanings as in Part 10.