Corporation Tax debt cap
HMRC have published draft regulations which relate to the corporation tax debt cap and deal with mismatches that arise in two separate sets of circumstances.
The first circumstance is where there is a difference in the amount of:
- a financial liability of a relevant group company disclosed in the accounts of the worldwide group and
- the amount of profit or loss brought into account for the purposes of Part 5 of the Corporation Tax Act 2009 (CTA 2009 loan relationships).
In such circumstances the available amount can be adjusted (either by addition or subtraction) to eliminate the mismatch.
The second circumstance is where a ‘late interest’ debit is treated under section 373 CTA 2009 as not accruing until it is paid.
The regulations allow the late interest to be subtracted from the available amount. There are already provisions within the debt cap rules that deal with late interest accruing prior to the introduction of the debt cap rules. The question is whether a similar rule would be suitable for interest subject to section 373 CTA 2009 after the introduction of debt cap.
An adjustment to the available amount will potentially affect the amount of financing income exempted from the debt cap rules. It is not proposed that any consequential adjustments be made to the exemption of financing income.
Comments by interested parties on the draft legislation should be sent to HMRC (by email) by 22 November 2010.