Overseas tax - Chapters 11 - 13 - CIR

Question 1

What are the 7 steps for a CIR calculation?

Answer 1

1. Determine worldwide group and its period of account
2. Calculate the ANTIE
3. Calculate the Aggregate Tax EBITDA
4. Calculate the Interest Allowance (IA)
5. Calculate the Interest Capacity (IC)
6. Calculate the Disallowed Amount
7. Allocate the Disallowed Amount among the Groups UK taxable companies

Question 2

What is the ANTIE de-minimus and what does it mean if this is not met?

Answer 2

The de-minimus is £2m

If the ANTIE is less than £2m then there will be no disallowed amount and no need to carry on through the steps

Question 3

How do we calculate the ANTIE (Step 2)?

Answer 3

ANTIE = sum of NTIE - NTII

Question 4

Name examples of what is added/subratcted when calculating a company tax EBITDA (Step 3)?

Answer 4

Calculation
TTP X
- Interest income (X)
- DTR income (X)
- RDEC (X)
- IFA income (X)
+ Interest expense X
+ Capital allowances X
+ Brought forward losses X
+ IFA amortisation X
+ Donations X
Tax EBITDA XX

Question 5

What are the two methods used to calculate IA, what is the formula for each and how do we decide which to use (Step 4)?

Answer 5

1. Fixed Ratio Method - BIA = Lower of (30% x aggregated tax EBITDA) and FRDC

FRDC = ANGIE + EDC^pp

2. Group Ratio Method - BIA = Lower of (V% x aggregated tax EBITDA) and GRDC

GRDC = QNGIE + EDC^pp

V% = (QNGIE / group EBITDA) x 100

We always choose the method that gives the greatest BIA

Question 6

How do we calculate the IC (Step 5)?

Answer 6

IC = Higher of £2m and TIA

TIA = [(BIA + ANTII) + BFIA]

Question 7

How do we calculate the Disallowed Amount (Step 6)?

Answer 7

Disallowed amount = ANTIE - IC

If IC is greater than the excess is carried forward into following period (BFIA)

Question 8

How do we calculate the Excess Debt Cap carried forward (EDC)?

Answer 8

EDC = Lower of (Difference between figures in the IA calculation) and CFL

CFL = EDC^pp + Disallowed amount

Question 9

What to mention regarding reporting company in exam?

4 points

Answer 9

1. Worldwide group must appoint reporting company that is subject to UK CT or HMRC will automatically appoint;
2. Must be done within 12 months of the end of the AP it relates to;
3. Automatically rolled over unless HMRC or Company revoke appointment;
4. At least half of the UK group companies must authorise the appointment of the reporting company.

Question 10

What to mention regarding abbreviated IRR and Full IRR?

4 points

Answer 10

1. Reporting company must submit either full or abbreviated IRR by later of 12 months after AP or 3 months from when reporting company is appointed;
2. Abbreviated IRR to be submitted if a company is not subject to CIR for that AP;
3. If a company wants to make use of unused IA or disallowed interest expenses the abbreviated IRR must be replaced with full IRR;
4. A company can replace an abbreviated IRR with full IRR within 5 years after end of AP it relates to.