Taxes Consolidation Act 1997 section 835AAH

Group ratio

Section 835AAH allows a relevant entity to elect to use a higher group ratio percentage in place of the standard 30 per cent EBITDA limit when calculating its allowable amount under the interest limitation rules.

• Where the group ratio for an accounting period exceeds 30 per cent, the relevant entity may elect to substitute that higher percentage for the standard EBITDA limit (subject to the restrictions in section 835AAJ(2) and (3)).
• The group ratio is calculated as the group's exceeding borrowing costs divided by the group EBITDA, expressed as a percentage, recognising that some industries are more highly leveraged than others.
• Group EBITDA is derived from the ultimate consolidated financial statements of the worldwide group (or single company worldwide group), excluding income tax, finance income, finance costs, depreciation, amortisation, capital impairments, and amounts relating to qualifying long-term infrastructure projects.
• Group exceeding borrowing costs are the net finance expense from the same consolidated financial statements, again excluding any finance income or finance costs relating to qualifying long-term infrastructure projects.