INTM578030 - Thin capitalisation: interest cover

What is income?

The purpose of calculating the interest cover in a particular thin capitalisation case is to obtain a measure of the ability of a group or company to service its interest-bearing debts. This is normally done on an annual basis. In every case the starting point is the operating profit shown in the audited accounts, with modifications appropriate to the situation. INTM578040 outlines some of the modifications.