This guidance note sets out the computational principles that are relevant for the calculation of the interest disallowance using the fixed ratio method and the group ratio method under the corporate interest restriction (CIR) rules. These principles include the following:
- the worldwide group basis
- periods of account
- acceptable GAAP
- relevant accounting periods (APs) and disregarded periods
For a general overview of the regime, see the Introduction to the corporate interest restriction guidance note.
References in this guidance note are to HMRC's guidance. The latest version, published on 28 February 2018, includes commentary on additional technical changes to ensure the regime works as intended, which have since been legislated as Finance Act 2018, s 24 and Sch 8.
Worldwide group basis
Unlike most taxing provisions, the CIR works on a group rather than a company-by-company basis. What this means is that most calculations required by the rules are carried out at the group level, with allocations of any interest restrictions (or reactivations) to individual companies within the charge to UK corporation tax being made afterwards. Many of the calculations require the extraction and aggregation of figures from the financial statements of the companies subject to UK corporation tax and the consolidated income statement of the worldwide group. TIOPA 2010, s 473; CFM95330