Taxation (International and Other Provisions) Act 2010 section 423

Capitalised interest brought into account for tax purposes in accordance with GAAP

Section 423 modifies how capitalised interest is treated within the corporate interest restriction rules when a worldwide group has made an interest allowance (alternative calculation) election.

• When the alternative calculation election is in effect, the normal rules for including capitalised interest and capitalised interest written off in adjusted net group-interest expense are switched off for assets or liabilities where profits or losses are calculated for corporation tax using GAAP (known as "GAAP-taxable" assets or liabilities).
• For GAAP-taxable assets that are "relevant assets", write-downs of carrying value attributable to relevant expense amounts are treated as upward adjustments, and reductions in carrying value attributable to relevant income amounts are treated as downward adjustments — regardless of which period the amount was originally included in.
• Where a GAAP-taxable asset is appropriated (or treated as appropriated) from trading stock to fixed assets during a relevant accounting period, its full carrying value attributable to relevant expense or income amounts feeds into the upward or downward adjustments — whether or not those amounts appear in the financial statements for the period in question.
• The write-off and write-down provisions do not apply to the extent that the adjusted net group-interest expense for an earlier period of account already included an amount for capitalised interest in respect of the same GAAP-taxable asset or liability, preventing double counting.

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