»Ê¹ÚÌåÓýapp

Group Companies

»Ê¹ÚÌåÓýapp rules for allocating finance costs between the tonnage tax and non-tonnage tax activities of a tonnage tax group are in FA00/SCH22/PARA62.

See TTM07410 for the meaning of ‘finance costs�.

Group companies taken into account

In the case of a tonnage tax group, the position of all the UK companies in the group has to be taken into account in deciding whether only a just and reasonable proportion of any finance costs has been claimed outside the ring fence.

»Ê¹ÚÌåÓýapp calculation should also include the activities of any overseas companies that qualify to pay dividends under FA00/SCH22/PARA49, see TTM06400. If more than a reasonable proportion of finance costs are claimed outside the ring fence then an adjustment has to be made.

Principle of fungibility

»Ê¹ÚÌåÓýapp rules operate on the presumption that finance is fungible.  In other words, that any borrowings of a company serve to finance all the activities of all the UK taxpaying companies in the group, even if they are initially earmarked to a particular company or for a particular project.

Just and reasonable apportionment

»Ê¹ÚÌåÓýapp just and reasonable calculation of finance costs attributable to non-tonnage tax activities should take into account the fact that finance requirements differ from activity to activity.  Shipping is generally a capital-intensive activity due to the high cost of the assets and would usually be expected to absorb a large part of any finance raised.  »Ê¹ÚÌåÓýapp calculation should also take into account any complex international financing structures that might distort the distribution of finance costs.

Adjustment required

If the group claims a deduction outside the ring fence for more than a just and reasonable proportion of its total finance costs an addition to the taxable profits of tonnage tax companies within the group is made for each such company.

»Ê¹ÚÌåÓýapp excess is shared among the tonnage tax companies in the group in proportion to their respective tonnage tax profits.  »Ê¹ÚÌåÓýapp addition for each company is treated as if it were a non-trading loan-relationship credit.

References

FA00/SCH22/PARA62 (finance costs - groups)	TTM17351
Outline of finance costs adjustment	TTM07400
Singleton company	TTM07420
Interaction between transfer pricing and finance costs	TTM07500