Section 395 Amount of interest allowance for a period of account that is “unexpired” in later periodF1

(1)

This section contains provision for determining for the purposes of this Chapter the extent to which an interest allowance of a worldwide group for a period of account (“the originating period”) is “unexpired” in a later period of account of the group (“the receiving period”).

(2)

If the receiving period—

(a)

begins 5 years or less after the originating period begins, and

(b)

ends 5 years or less after the originating period ends,

all of the interest allowance for the originating period is unexpired in the receiving period.

(3)

If the receiving period begins 5 years or more after the originating period ends, none of the interest allowance for the originating period is unexpired in the receiving period.

(4)

Subsection (5) applies if the receiving period—

(a)

begins more than 5 years after the originating period begins, and

(b)

ends 5 years or less after the originating period ends.

(5)

The amount of the interest allowance for the originating period that is unexpired in the receiving period is—

(A - B) \times \frac{X}{Y}

where—

A is the interest allowance for the originating period;

B is—

(a)
the aggregate net tax-interest expense of the group for the originating period, or
(b)
if lower, the interest allowance for the originating period;

X is the number of days in the period—

(a)
beginning with the day on which the receiving period begins, and
(b)
ending with the day 5 years after the day on which the originating period ends;

Y is the number of days in the originating period.

(6)

Subsection (7) applies if the receiving period—

(a)

begins 5 years or less after the originating period begins, and

(b)

ends more than 5 years after the originating period ends.

(7)

The amount of the interest allowance for the originating period that is unexpired in the receiving period is—

(C - D) \times \frac{X}{Z}

where—

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

D is—

(a)
the interest allowance of the group for the receiving period, or
(b)
if lower, the aggregate net tax-interest expense of the group for the receiving period;

X has the same meaning as in subsection (5);

Z is the number of days in the receiving period.

(8)

Subsection (9) applies if—

(a)

the receiving period—

(i)

begins more than 5 years after the originating period begins, and

(ii)

ends more than 5 years after the originating period ends, and

(b)

subsection (3) does not apply.

(9)

The amount of the interest allowance for the originating period that is unexpired in the receiving period is the lower of the amounts determined under subsections (5) and (7).

Annotations

Textual amendments

F1: Pt. 10: the existing Pt. 10 renumbered as Pt. 11 (except for ss. 375, 376 which are repealed), the existing ss. 372-374, 377-382 renumbered as ss. 499-507 and a new Pt. 10 (ss. 372-498) inserted (with effect in accordance with Sch. 5 para. 25(1)-(3) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 1, 10(1)(2)(a)(3) (with Sch. 5 paras. 27, 32-34)

Notes on Part 10

Modifications

C1: Pt. 10 excluded by 2010 c. 4, s. 937NA (as inserted (with effect in accordance with Sch. 5 para. 25(1)(2) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 7)
C2: Pt. 10 excluded by 2010 c. 4, s. 938V(d) (as substituted (with effect in accordance with Sch. 5 para. 25(1)(2) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 9)
C3: Pt. 10 excluded by 2010 c. 4, s. 938N(e) (as substituted (with effect in accordance with Sch. 5 para. 25(1)(2) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 8)