»Ê¹ÚÌåÓýapp

FA22/SCH2/PARA20 and PARA21 

Apportionment of income and expenses 

PARA 20(6) provides for the apportionment of any amounts that relate to both ring fence and non-ring fence activity. Any such apportionment should be on a just and reasonable basis. 

In relation to staff costs, for example, it would be reasonable to consider the amount of staff time required to manage ring fence and non-ring fence assets, and to use that time apportionment as a just and reasonable basis for the apportionment of staff costs.  

Example: loan relationship debits split between UK and overseas property business. 

Company A is a QAHC that incurs interest costs (loan relationship debits) in relation to its overseas property business and its UK property business. »Ê¹ÚÌåÓýapp profits of the overseas property business are taxable in another jurisdiction (see PARA 52), and therefore within the QAHC ring fence business. Company A incurs overall loan relationship debits of £10m in relation to its property business. 75 percent of the related borrowing has been invested in the UK property business. 

On a just and reasonable split of the £10m loan relationship debits, £2.5m should be allocated to the overseas property business within the QAHC ring fence, and £7.5m to the UK property business outside the QAHC ring fence.