CFM91830 - Debt cap: failure to make statements of allocation: default allocation of disallowance of financing expense amounts: DRICs: formulae

This guidance applies to worldwide group periods of account ending before or straddling 1 April 2017.

Calculating the default reduction: DRICs: formulae

»Ê¹ÚÌåÓýapp formulae are set out at TIOPA10/S284A.

In looking first at the subset of non-DRICS, the total of the reductions required to be made by each non-DRIC company is:

NFD / (TEA - X) x TDA, where

  • NFD is the net financing deduction of the company for the relevant period of account.
  • TEA is the tested expense amount for the relevant period of account
  • TDA is the total disallowed amount
  • X is the total of the net financing deductions of all the companies to which this Chapter applies that are dual resident investing companies.

»Ê¹ÚÌåÓýappn in looking at the subset of DRICS, the total of the reductions required to be made by each DRIC company is:

(NFD / X) x (TDA - (TEA - X)), where the values are as shown for non-DRICs above.

An example showing the practical effect of the allocation in such circumstances is given at CFM91835.