Finance Bill (HC Bill 102)

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(2) The amount specified under sub-paragraph (1)(b) in relation to a
company is referred to in this Part of this Act as the “allocated
disallowance” of the company for the return period.

(3) The allocated disallowance of a company for the return period—

(a) 5must not exceed the net tax-interest expense of the
company for the return period,

(b) where the company is a non-consenting company in
relation to the return, must not exceed the company’s pro-
rata share of the total disallowed amount (see paragraph
1023), and

(c) must not be a negative amount.

(4) The sum of the allocated disallowances for the return period of the
companies listed in the statement must equal the total disallowed
amount.

(5) 15The statement must also specify an amount in relation to each
relevant accounting period of each company listed in the
statement.

(6) The amount specified under sub-paragraph (5) in relation to an
accounting period of a company is referred to in this Part of this
20Act as the “allocated disallowance” of the company for the
accounting period.

(7) In the case of a company that has only one relevant accounting
period, the allocated disallowance of the company for that
accounting period must be equal to the allocated disallowance of
25the company for the return period.

(8) In the case of a company that has more than one relevant
accounting period, the allocated disallowance of the company for
any of those accounting periods—

(a) must not exceed so much of the net tax-interest expense of
30the company for the return period as is referable to the
accounting period,

(b) where the company is a non-consenting company in
relation to the return, must not exceed the accounting
period’s pro-rata share of the total disallowed amount (see
35paragraph 24), and

(c) must not be a negative amount.

(9) The sum of the allocated disallowances of the company for its
relevant accounting periods must be equal to the allocated
disallowance of the company for the return period.

40A company’s pro-rata share of the total disallowed amount

23 (1) This paragraph—

(a) applies in relation to a worldwide group that is subject to
interest restrictions in a period of account of the group, and

(b) allocates the total disallowed amount of the group in the
45period to companies that are UK group companies at any
time during the period.

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(2) The amount allocated to a company under this paragraph is
referred to in this Part of this Act as the company’s “pro-rata
share” of the total disallowed amount.

(3) Sub-paragraph (4) applies in relation to a company that has net
5tax-interest expense for the period of account.

(4) The amount of the total disallowed amount that is allocated to the
company is—


where—

  • 10A is the total disallowed amount;

  • B is the net tax-interest expense of the company for the period
    of account;

  • C is the sum of the net tax-interest expense for the period of
    account of each company that has net tax-interest expense
    15for the period.

(5) Where this paragraph does not allocate any of the total disallowed
amount to a company, the company’s “pro-rata share” of the total
disallowed amount is nil.

Accounting period’s pro-rata share of the total disallowed amount

24 (1) 20This paragraph—

(a) applies in relation to a worldwide group that is subject to
interest restrictions in a period of account of the group
(“the relevant period of account”), and

(b) allocates the total disallowed amount of the group in the
25period of account to relevant accounting periods of
companies that are UK group companies at any time
during that period.

(2) The amount allocated to an accounting period under this
paragraph is referred to in this Part of this Act as the accounting
30period’s “pro-rata share” of the total disallowed amount.

(3) Sub-paragraph (4) applies where—

(a) a company’s pro-rata share of the total disallowed amount
is not nil, and

(b) the company has only one relevant accounting period.

(4) 35The amount of the total disallowed amount that is allocated to the
accounting period is the company’s pro-rata share of the total
disallowed amount.

(5) Sub-paragraph (6) applies where—

(a) a company’s pro-rata share of the total disallowed amount
40is not nil, and

(b) the company has more than one relevant accounting
period.

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(6) The amount of the total disallowed amount that is allocated to a
relevant accounting period of the company is—


where—

  • 5A is the company’s pro-rata share of the total disallowed
    amount;

  • B is the net tax-interest expense of the company for the
    accounting period;

  • C is the sum of the net tax-interest expenses of the company
    10for each relevant accounting period.

(7) Where this paragraph does not allocate any of the total disallowed
amount to an accounting period of a company, the accounting
period’s “pro-rata share” of the total disallowed amount is nil.

(8) For the purposes of this paragraph, the “net tax-interest expense”
15of a company for a relevant accounting period is—

(a) so much of the net tax-interest expense of the company for
the relevant period of account as is referable to the
accounting period, or

(b) if the amount determined under paragraph (a) is negative,
20nil.

Statement of allocated interest reactivations

25 (1) The statement of allocated interest reactivations required by
paragraph 20(3)(f) to be included in a full interest restriction
return must—

(a) 25list one or more companies that are UK group companies
at any time during the return period,

(b) in relation to each company listed under paragraph (a),
specify an amount, and

(c) show the total of the amounts specified under paragraph
30(b).

(2) The amount specified under sub-paragraph (1)(b) in relation to a
company is referred to in this Part of this Act as the “allocated
reactivation” of the company for the return period.

(3) The allocated reactivation of a company for the return period—

(a) 35must not exceed the amount available for reactivation of
the company in the return period (see paragraph 26), and

(b) must not be a negative amount.

(4) The sum of the allocated reactivations for the return period of the
companies listed in the statement must equal—

(a) 40the sum of the amounts available for reactivation of each
company in the return period, or

(b) if lower, the interest reactivation cap of the worldwide
group in the return period.

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“Amount available for reactivation” of company in period of account of group

26 (1) This paragraph applies for the purposes of this Part of this Act.

(2) The “amount available for reactivation” of a company in a period
of account of a worldwide group (“the relevant worldwide
5group”) is—

(a) the amount determined under sub-paragraph (3), or

(b) if lower, the company’s interest reactivation cap (see sub-
paragraph (5)).

(3) The amount referred to in sub-paragraph (2)(a) is—


10

A + B − C + D − E

where—

  • A is the total of the disallowed tax-interest expense amounts
    (if any) that are brought forward to the specified
    accounting period from earlier accounting periods;

  • 15B is the total of the tax-interest expense amounts (if any) that
    the company is required to leave out of account in the
    specified accounting period as a result of the operation of
    this Part of this Act in relation to a period of account of the
    worldwide group before the period of account;

  • 20C is the total of the disallowed tax-interest expense amounts
    (if any) that the company is required to bring into account
    in the specified accounting period as a result of the
    operation of this Part of this Act in relation to a period of
    account of the worldwide group before the period of
    25account;

  • D is the total of the tax-interest expense amounts (if any) that
    the company is required to leave out of account in the
    specified accounting period as a result of the operation of
    this Part of this Act in relation to a period of account of a
    30worldwide group of which the company was a member
    before it became a member of the relevant worldwide
    group;

  • E is the total of the disallowed tax-interest expense amounts
    (if any) that the company is required to bring into account
    35in the specified accounting period as a result of the
    operation of this Part of this Act in relation to a period of
    account of a worldwide group of which the company was
    a member before it became a member of the relevant
    worldwide group.

(4) 40In sub-paragraph (3) “the specified accounting period” means—

(a) the earliest relevant accounting period of the company, or

(b) where the company became a member of the relevant
worldwide group during the period of account, the earliest
relevant accounting period of the company in which it was
45a member of the group.

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(5) For the purposes of sub-paragraph (2)(b) “the interest reactivation
cap” of the company is—


A × B

where—

  • 5A is the interest reactivation cap of the worldwide group in
    the period of account;

  • B is the proportion of the period of account in which the
    company is a UK group company.

Estimated information in statements

27 (1) 10This paragraph applies in relation to a statement under—

(a) paragraph 21 (statement of calculations),

(b) paragraph 22 (statement of allocated interest restrictions),
or

(c) paragraph 25 (statement of allocated interest
15reactivations).

(2) Where any information is included in the statement that is (or is
derived from) estimated information, the statement—

(a) must state that fact, and

(b) must identify the information in question.

(3) 20Where—

(a) estimated information (or information deriving from
estimated information) is included in an interest restriction
return for a period of account in reliance on this paragraph,
and

(b) 25a period of 36 months beginning with the end of that
period of account has passed without the information
becoming final,

the reporting company must give a notice to an officer of Revenue
and Customs within the period of 30 days beginning with the end
30of that 36-month period.

(4) The notice—

(a) must identify the information in question that is not final,
and

(b) must indicate when the reporting company expects the
35information to become final.

(5) If a company fails to comply with the duty under sub-paragraph
(3), it is liable to a penalty of £500.

(6) An officer of Revenue and Customs may, in a particular case, treat
a revised interest restriction submitted after the end of the
40applicable period under paragraph 8(3)(a) or (b) as having effect
if—

(a) the revisions to the return are limited to those necessary to
take account of information that has become final,

(b) the officer considers that it was not possible to make those
45revisions before the end of that period, and

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(c) the reporting company has complied with the duty under
sub-paragraph (3).

Correction of return by officer of Revenue and Customs

28 (1) An officer of Revenue and Customs may amend an interest
5restriction return submitted by a company so as to correct—

(a) obvious errors or omissions in the return (whether errors
of principle, arithmetical mistakes or otherwise), and

(b) anything else in the return that the officer has reason to
believe is incorrect in the light of information available to
10the officer.

(2) A correction under this paragraph is made by notice to the
company.

(3) A correction under this paragraph must not be made more than 9
months after the day on which the return was submitted.

(4) 15A correction under this paragraph is of no effect if the company—

(a) revises the return so as to reject the correction, or

(b) after the end of the period mentioned in paragraph 8(3)(a)
or (b) but within 3 months from the date of the issue of the
notice of correction, gives notice rejecting the correction.

(5) 20Notice under sub-paragraph (4)(b) must be given to the officer of
Revenue and Customs by whom notice of the correction was
given.

Penalty for failure to deliver return

29 (1) A company is liable to a penalty if the company—

(a) 25is required to submit an interest restriction return under
paragraph 7 for a period of account of a worldwide group,
and

(b) fails to do so by the filing date in relation to the period (see
sub-paragraph (5) of that paragraph).

(2) 30The penalty is—

(a) £500 if the return is delivered within 3 months after the
filing date, and

(b) £1,000 in any other case.

(3) If a company becomes liable to a penalty under this paragraph, an
35officer of Revenue and Customs must—

(a) assess the penalty, and

(b) notify the company.

(4) The assessment must be made within the period of 12 months
beginning with the filing date mentioned in sub-paragraph (1)(b).

(5) 40A company may, by notice, appeal against a decision of an officer
of Revenue and Customs that a penalty is payable under this
paragraph.

(6) Notice of appeal under this paragraph must be given—

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(a) within 30 days after the penalty was notified to the
company,

(b) to the officer of Revenue and Customs who notified the
company.

(7) 5A penalty under this paragraph must be paid before the end of the
period of 30 days beginning with—

(a) the day on which the company was notified of the penalty,
or

(b) if notice of appeal against the penalty is given, the day on
10which the appeal is finally determined or withdrawn.

Penalty for incorrect or uncorrected return

30 (1) A company is liable to a penalty if—

(a) the company (or a person acting on its behalf) submits an
interest restriction return to an officer of Revenue and
15Customs for a period of account of a worldwide group,

(b) there is an inaccuracy in the return which meets condition
A or B, and

(c) the inaccuracy is due to a failure by the company (or a
person acting on its behalf) to take reasonable care (a
20“careless inaccuracy”) or the company makes the
inaccuracy deliberately (a “deliberate inaccuracy”).

(2) An inaccuracy meets condition A if it consists of understating the
total disallowed amount in the period of account of the group
(including a case where no amount is specified in the return).

(3) 25An inaccuracy meets condition B if it consists of overstating the
interest reactivation cap in the period of account of the group.

(4) A penalty payable under this paragraph is equal to the
appropriate part of the notional tax.

(5) For the purposes of this Part of this Schedule—

  • 30“the appropriate part” means—

    (a)

    in the case of a careless inaccuracy, 30%,

    (b)

    in the case of a deliberate inaccuracy that is not
    concealed, 70%, and

    (c)

    in the case of a deliberate inaccuracy that is concealed,
    35100%, and

  • “the notional tax” means the result produced by applying the
    average rate of the main corporation tax rate applicable in
    each of the days of the period of account to the total of the
    amount of the understatement referred to in condition A
    40and the amount of the overstatement referred to in
    condition B.

(6) A company is not liable to a penalty under this paragraph in
respect of anything done or omitted to be done by the company’s
agent if the company took reasonable care to avoid the inaccuracy.

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Meaning of “deliberate inaccuracy that is concealed” and discovering inaccuracy after
return submitted

31 (1) For the purposes of this Part of this Schedule a deliberate
inaccuracy made by a company is concealed if the company makes
5arrangements to conceal it (for example, by submitting false
evidence in support of an inaccurate figure).

(2) An inaccuracy in an interest restriction return which was not a
careless or deliberate inaccuracy made by a company (or a person
acting on its behalf) when the return was submitted is taken to be
10a careless inaccuracy made by the company for the purposes of
this Part of this Schedule if the company (or a person acting on its
behalf)—

(a) discovers the inaccuracy at some later time, and

(b) does not take reasonable steps to inform an officer of
15Revenue and Customs.

Inaccuracy in return attributable to another company

32 (1) A company (“C”) is liable to a penalty if—

(a) another company submits an interest restriction return for
a period of account of a worldwide group,

(b) 20there is an inaccuracy in the return which meets condition
A or B in paragraph 30, and

(c) the inaccuracy was attributable to C deliberately
supplying false information to the other company, or to C
deliberately withholding information from the other
25company, with the intention of the return containing the
inaccuracy.

(2) A penalty is payable under this paragraph in respect of an
inaccuracy whether or not the other company is liable to a penalty
under paragraph 30 in respect of the same inaccuracy.

(3) 30A penalty payable under this paragraph is equal to the notional
tax.

Reductions in amount of penalty for disclosure or special circumstances

33 (1) If a company liable to a penalty under paragraph 30 or 32 in
respect of an inaccuracy discloses the inaccuracy—

(a) 35the penalty must be reduced to one that reflects the quality
of the disclosure (including its timing, nature and extent),
but

(b) the penalty may not be reduced below the applicable
minimum.

(2) 40In the case of a penalty under paragraph 30, the applicable
minimum is—

(a) in the case of a careless inaccuracy, 0% of the notional tax
if the disclosure is unprompted and 15% otherwise,

(b) in the case of a deliberate inaccuracy that is not concealed,
4530% of the notional tax if the disclosure is unprompted and
45% otherwise, and

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(c) in the case of a deliberate inaccuracy that is concealed, 40%
of the notional tax if the disclosure is unprompted and 60%
otherwise.

(3) In the case of a penalty under paragraph 32, the applicable
5minimum is 40% of the notional tax if the disclosure is
unprompted and 60% otherwise.

(4) For the purposes of this paragraph—

(a) a person makes a disclosure of an inaccuracy by telling an
officer of Revenue and Customs about it, giving an officer
10of Revenue and Customs reasonable help in quantifying it
and allowing an officer of Revenue and Customs access to
records to ensure that it is fully corrected, and

(b) a person makes an “unprompted” disclosure at any time if
the person has no reason at that time to believe that an
15officer of Revenue and Customs have discovered, or are
about to discover, the inaccuracy.

(5) If they think it right because of special circumstances, an officer of
Revenue and Customs may—

(a) reduce a penalty under paragraph 30 or 32, or

(b) 20stay the penalty or agree a compromise in relation to
proceedings for the penalty.

(6) The reference to special circumstances does not include an ability
to pay but, subject to that, is taken to include, or exclude, such
other circumstances as are prescribed by regulations made by the
25Commissioners.

(7) The power to prescribe circumstances includes power to prescribe
circumstances by reference to the notional tax and the extent to
which the notional tax exceeds, or is likely to exceed, any actual
loss of tax to the Crown.

30Assessment, payment and enforcement of penalty

34 (1) If a person becomes liable to a penalty under paragraph 30 or 32,
an officer of Revenue and Customs must—

(a) assess the penalty, and

(b) notify the person.

(2) 35The assessment must be made within the period of 12 months
beginning with the day on which the inaccuracy is corrected.

(3) The penalty must be paid before the end of the period of 30 days
beginning with—

(a) the day on which the person was notified of the penalty, or

(b) 40if notice of appeal against the penalty is given, the day on
which the appeal is finally determined or withdrawn.

(4) An assessment may be enforced—

(a) as if it were an assessment to corporation tax (which,
among other things, secures the application of Chapters 6
45and 7 of Part 22 of CTA 2010 (corporation tax payable by
non-UK resident companies: recovery from others)), and

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(b) as if that assessment were also an assessment to
corporation tax of any company which was a UK group
company of the group at any time in the period of account
in relation to which the interest restriction return
5contained an inaccuracy.

Right to appeal against penalty or its amount

35 A person may, by notice, appeal against—

(a) a decision of an officer of Revenue and Customs that a
penalty under paragraph 30 or 32 is payable, or

(b) 10a decision of an officer of Revenue and Customs as to the
amount of a penalty under paragraph 30 or 32.

Procedure on appeal

36 (1) Notice of an appeal under paragraph 35 must be given—

(a) within 30 days after the penalty was notified to the person,

(b) 15to an officer of Revenue and Customs.

(2) On an appeal notified to the tribunal against a decision that a
penalty is payable, the tribunal may confirm or cancel the
decision.

(3) On an appeal notified to the tribunal against the amount of a
20penalty, the tribunal may—

(a) confirm the decision, or

(b) substitute for the decision another decision that an officer
of Revenue and Customs had power to make.

(4) If the tribunal substitutes its decision for a decision of an officer of
25Revenue and Customs, the tribunal may rely on paragraph 33(5)

(a) to the same extent as an officer of Revenue and Customs
(which may mean applying the same percentage reduction
as the officer to a different starting point), or

(b) to a different extent, but only if the tribunal thinks that the
30decision in respect of the application of paragraph 33(5)
was flawed.

(5) For this purpose “flawed” means flawed when considered in the
light of the principles applicable in proceedings for judicial
review.

(6) 35Subject to this Part of this Schedule, the provisions of Part 5 of
TMA 1970 relating to appeals have effect in relation to appeals
under this Part of this Schedule as they have effect in relation to
appeals against an assessment to corporation tax.

Payments between companies in respect of penalties

37 (1) 40This paragraph applies if—

(a) a company (“P”) liable to a penalty under this Part of this
Schedule has an agreement in relation to the penalty with
one or more other companies within the charge to
corporation tax, and