Taxation (International and Other Provisions) Act 2010 section 417

The capital (expenditure) adjustment

Section 417 defines the capital expenditure adjustment used in calculating a group's EBITDA (earnings before interest, tax, depreciation and amortisation) for the corporate interest restriction rules.

• The capital expenditure adjustment is calculated as A minus B minus C, where A is capital expenditure recognised in the period, B is reversals of previously recognised capital expenditure, and C is capital income — all relating to relevant assets and brought into account in determining the group's profit before tax.
• Relevant capital expenditure includes depreciation, amortisation, impairment charges, capital expenditure incurred and recognised in the period, and provisions for future capital expenditure, provided these relate to relevant assets.
• Relevant assets are defined broadly to include plant, property and equipment, investment properties, intangible assets (including internally generated ones), goodwill (including internally generated goodwill), shares in companies, and interests in profit-sharing entities.
• Any capital expenditure amount that forms part of a profit or loss on disposal of a relevant asset is excluded from the adjustment — it does not count towards the A component of the formula.

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