Revenue Note for Guidance

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Revenue Note for Guidance

Chapter 3

Group and Equity Ratios

Summary

This chapter contains two reliefs, one of which may apply on election where the relevant conditions are satisfied. The reliefs take into account the debt or net interest position of the relevant entity relative to the worldwide group to which it belongs. The group ratio operates to increase the threshold for the allowable amount of exceeding borrowing costs in certain circumstances. The equity ratio operates to exempt a relevant entity from the interest limitation in certain circumstances.

835AAG Interpretation (Chapter 3)

Summary

The section provides the definitions for certain terms for the purposes of this chapter.

Details

Definitions

(1) “associated enterprise” has the same meaning as it has in Part 35C, other than Chapters 2, 3, and 8 of that Part and in the application of that Part to hybrid entities.

“group EBITDA” means the amount included in respect of profit of loss, before taking into account any amount of income tax, finance income, finance costs, depreciation, amortisation, or impairments, and excluding any amounts in respect of a qualifying longterm infrastructure project, in the ultimate consolidated financial statements of the group of which the relevant entity is a member for the period in which the relevant entity’s accounting period ends.

“group exceeding borrowing costs” means the net finance expense in the ultimate consolidated financial statements of the group of which the relevant entity is a member for the period in which the relevant entity’s accounting period ends, excluding any finance income or finance expenses relating to a qualifying long-term infrastructure project.

“group ratio” is the amount of group exceeding borrowing costs divided by group EBITDA, expressed as a percentage.

(2) Where the relevant entity is a single company worldwide group, group exceeding borrowing costs and group EBITDA are calculated based on the financial statements of the relevant entity as prepared in accordance with international accounting standards or Irish generally accepted accounting practice, which are adjusted by disregarding transactions with associated enterprises.

(3) Provides that where it is reasonable to consider that the main purpose or one of the main purposes of an arrangement, or part of an arrangement, is the avoidance of the effect of an adjustment to the calculation of group exceeding borrowing costs and group EBITDA as required under subsection (2), then subsection (2) applies as if the arrangement or part thereof had not been entered into.

Relevant Date: Finance Act 2021