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

Group R - financing income and unrestricted reductions example

In the group scenario in CFM91820 above, two companies had finance income amounts. Company U had finance income of £950,000 and Company V had finance income of £800,000.

»Ê¹ÚÌåÓýapp total disallowed amount for Group R was £650,000. »Ê¹ÚÌåÓýapp tested income amount is the sum of the net financing income of each UK group company. In this example, Companies U and V only have financing income, but if they had financing expenses then they would be netted against the financing income to calculate the net financing income. »Ê¹ÚÌåÓýapp tested income amount for Companies U and V is £1,750,000.

»Ê¹ÚÌåÓýapp lower of the total disallowed amount and tested income amount is £650,000.

»Ê¹ÚÌåÓýapp total of unrestricted reductions is £1,750,000 (£950,000 for Company U and £800,000 for Company V).

As the total of the unrestricted reductions exceeds the total disallowed amount then we need to apply the formula:

___UR___

UR x X

to reduce the unrestricted reduction for each company. X is £1,100,000 (the excess of the total of the unrestricted reductions over the lesser of the total disallowed amount or tested income amount).

For Company U the unrestricted reduction will be reduced by:

950,000/1,750,000 x 1,100,000 = £597,143

For Company V the unrestricted reduction will be reduced by:

800,000/1,750,000 x 1,100,000 = £502,857

As a consequence of this computation Company A will be charged on financing income of £597,143 and Company V on financing income of £502,857.