Taxes Consolidation Act 1997 section 835AAD

Carry forward of disallowable amount

Section 835AAD sets out the rules for carrying forward disallowable amounts arising under the interest limitation rule, and the manner in which such carried-forward amounts (termed "deemed borrowing costs") may be relieved in later accounting periods.

• Where a company's interest deduction is restricted under section 835AAC, the disallowable amount is carried forward to succeeding accounting periods as a "deemed borrowing cost" and may be relieved in three ways depending on how the restriction originally affected the company: as a deduction from total profits or chargeable gains, as a loss or excess, or as excess management expenses.
• Where deemed borrowing cost is set against profits taxed at a rate higher than 12.5% (e.g. 25%) or against chargeable gains, a rate-adjustment fraction increases the amount of deemed borrowing cost consumed from the pool, reflecting its inherent tax value of 12.5%.
• The total relief available in any accounting period from deemed borrowing costs (together with any amount carried forward under section 291A as restricted interest) is capped at the company's total spare capacity for that period, with loss relief under subsection (8) taking priority over other forms of relief.
• A disallowable amount that reduced the interest deductible in connection with a specified intangible asset cannot be carried forward as a deemed borrowing cost; instead it is carried forward under section 291A as an amount of interest for which relief could not be given.