扒哥吃瓜

For visual illustration view 

The diagram shows X plc and other investors each owning 50% of a joint venture (JV).

X plc has operating profits of 100 and pays interest expense of 50 to a third party. X plc makes a non鈥慶onsolidated investment allowance election.

The JV has operating profits of 150 and pays interest expense of 60 to a third party.

The diagram is used to illustrate how X plc is considered separately from the JV when a non鈥慶onsolidated investment allowance election is made.

Here the same figures from the example at CFM96740 are used but consider that X plc has now made an investment allowance (non-consolidated investment) election. Note that qualifying net group-interest expense is referred to as QNGIE in the calculation.

Accounts	X  plc	JV	X plc Group
Operating profit	100	150	100
3rd party interest expenses	- 50	- 60	- 50
Share of profits of JV	-	-	45
Profict Before Tax	50	90	95

• X plc group share of profits from JV  -  50%

Calculation of QNGIE	X plc Group
QNGIE in X plc group ( pre-election)	50
Share of JV QNGIE	30
Total QNGIE - (A)	80

Calculation of group -EBITDA	X plc Group
Group - EBITDA of X plc group ( pre-election)	145
Reduction in group - EBITDA	- 45
Increase in share of group - EBITDA from JV group -EBITDA	75
Group - EBITDA - (B)	175

• Group ratio with election - 46% - ( A/B)

Interest allowances	X plc
Tax - EBITDA	100
X plc group ratio	46%
Interest allowance	46
Net tax- interest expense for X plc group	50
Less interest allowance	- 46
Restriction	4

With the election X plc is now able to calculate a group ratio of 46%. If this is compared to the example in CFM96740 when the election has not been made, this is a significant increase and leads to a reduction in the interest restriction.