Section 394 | When interest allowance is “used”

From legislation.gov.uk

(1)This section applies for the purposes of this Chapter.

(2)The amount of the interest allowance of a worldwide group for a period of account of the group (“the originating period”) that is “used” in the originating period is the lower of—

(a)the interest allowance for the originating period, and

(b)the sum of—

(i)the aggregate net tax-interest expense of the group for the originating period;

(ii)the total amount of tax-interest expense amounts required to be brought into account in the originating period under section 379 (reactivation of interest) by members of the group.

(3)The amount of the interest allowance for the originating period that is “used” in a later period of account of the group (“the receiving period”) is the lower of—

(a)the interest allowance so far as it is available in the receiving period (see section 393), and

(b)the relevant part of the aggregate net tax-interest expense of the group for the receiving period (see subsection (4)).

(4)In subsection (3)(b) “the relevant part of the aggregate net tax-interest expense of the group for the receiving period” is (subject to subsection (5))—

Formula

A - B - C

where—

A is the aggregate net tax-interest expense of the group for the receiving period;

B is the interest allowance of the group for the receiving period;

C is the amount of the interest allowance of the group for any period before the originating period that is used in the receiving period.

(5)Where the amount determined under subsection (4) is negative, “the relevant part of the aggregate net tax-interest expense of the group for the receiving period” is nil.